May 13, 2024

Currency News

MyCURRENCY News | Week 20 2024

MyCURRENCY News | Week 20 2024

What we know

This past week the rand traded in a narrow range of 30 cents, with a high of 18.67 and a low of 18.37 ending the week at USD.ZAR 18.38 to the dollar, eight cents lower than the opening rate of 18.46. We remained mostly within our projected range for the week only breaking the 18.60 upper bound on Wednesday for a brief period. The Dollar closed the week on a reasonably strong footing signalling that some Rand specific strength may be responsible for the Rand stability.

A functioning economy leading up to elections seems to be driving some Rand strength aided by a rally off the back of weak jobs data and unemployment figures out of the US as we mentioned last week. We saw a consolidation due to the various election probabilities being mostly priced into the market with only a few weeks to go. With voting day on the 29th of May, the market will likely be holding its breath for results before a new trading direction is established.

The Bank of England seem to be following suit with the US regarding interest rate cuts or rather the lack thereof. The BoE meeting ending on Wednesday saw rates remain unchanged at 5.25% with an optimistic outlook for cuts this summer but we would need to see a more significant decline in inflation. On the other side of the coin, the latest month on month GDP growth in the UK came in at 0.4% which is higher than the forecasted 0.1%.

With very little data from the US last week the UK interest rate decision took the spotlight. Although rates have remained unchanged, the UK seem to be faring better that the US when it comes to battling inflation. The UK March CPI was 3.2% year-on year, down from 3.4% in February. While the Fed are forced to continuously push out rate cuts, the Bank of England may have an opportunity to provide consumers at least some breathing room in the near future. The increased likelihood of a rate cut and general positive sentiment around South Africa has aided the Rand in gaining some ground against the Pound dipping below the GBP.ZAR 23.00 level.

What others say

ReutersGirding Russia for war, Putin gives extra duties to two top officials

“Manturov oversees the Russian defence and civilian industry, which has surprised the United States and its European allies by ramping up artillery production faster than the whole of the NATO military alliance combined despite sanctions.”

Daily MaverickNvidia rivals gold as shield against inflation, survey shows

“The response highlights the dominant role that companies like Nvidia Corp., Inc., and Meta Platforms Inc. are playing in the US financial markets as they expand their sway over major swaths of the economy. That has allowed them to generate steady profits, stoking rallies that are making investors confident that they will continue to be a source of solid gains.”

CNBCBritain faces its ‘most dangerous’ years in history, PM Rishi Sunak to warn in pre-election bid

“In a speech to be delivered in central London, Sunak will say that the years ahead will be among the most challenging in Britain’s history, with threats such as war, migration and technology all set to intensify.”

What we think

Last week we said that, “Non-Farm Payrolls and the Unemployment Rate both disappointed, pushing the Dollar Index to its weakest level in almost a month… we’ve been calling for soft USD data for some time, while being proven wrong… We do now need to see more weak US data in the coming weeks and months, which could then potentially allow the Rand to eye the big 18.00 figure.”

After weak employment data two weeks ago and a quiet week last week, the significant news out of the US this week consists of PPI figures on Tuesday afternoon followed by the Fed chair, Jerome Powell, addressing the press later on Tuesday. A poor PPI release on top of a fairly reserved forecast could aid the ZAR in its push stronger considering last week’s underwhelming employment release.

The way forward for the Fed becomes more challenging as they continue to extend rate cuts and the highly anticipated “soft landing” for the US economy seems to be slipping if the Fed is unable to get inflation under control.

In the lead up to elections here in South Africa, a lack of any significant news leaves very little to move the markets in either direction, and we find ourselves in a stalemate when considering how markets may move this week.

Our range for the week: 18.30 – 18.60.

Have a great week ahead.