May 20, 2024

Currency News

MyCURRENCY News | Week 21 2024

MyCURRENCY News | Week 21 2024

What we know

Last week was a testament to the fact that wherever the Dollar goes, the Rand follows. Markets traded from an open at R18.40 to a close at R18.13, a boastful 1.5% gain for the Rand. While there is a somewhat positive sentiment surrounding the Rand currently leading up to the elections, most of these gains can be attributed to the US data points that were released throughout the course of the week.

Markets were looking toward the US CPI (Inflation) figure that was released last week with the bulk of the Dollar weakness coming off the back end of this. Month-on-Month inflation pegged at 0.3% compared to the forecasted 0.4%, while Year-on-Year Inflation came in at the forecasted 3.4%. This is still far off from The Federal Reserve’s desired target, although lowering inflation will keep the conversation of an interest rate cut on the table.

Furthermore, retail sales (Month-on-Month) in the US saw no growth, which is a tell-tale sign that economic activity in the US is contracting as consumers feel the burn of increasing inflation.

Last week was a relatively quiet week locally in terms of calendar news, with the two more significant announcements being our staggering unemployment rate moving higher from 32.1% to 32.9%, and retail sales increasing from -0.7% to 2.3%.

There was some attention on the passing of the NHI Bill last week, although before this comes into law, we can imagine there will be sustained push back from Private Health Care companies, and thus believe that this was more of a non-event than anything potentially market moving.

What others say

BBCCould the US economy be doing too well?

“The US is enjoying a strange economic boom, with consequences for the global balance of power, the future of the planet and the UK’s future growth prospects. It is borrowing billions to boost its economy – taking a huge risk but with potentially huge rewards.”

MoneywebSA rides a wave of investor cash before the election

“Stocks are at a 15-month high and the rand is one of only five emerging-market currencies to strengthen this year. The most pivotal South African election in decades is already turning the tide of the country’s financial markets.”

Visual CapitalistRanked: The Top 6 Economies by Share of Global GDP (1980-2024)

“Over time, the distribution of global GDP among the world’s largest economies has shifted dynamically, reflecting changes in economic policies, technological advancements, and demographic trends.”

Zero HedgeJapan’s Doom Loop

“Over the past quarters, the investor recency bias has been that a weaker Japanese Yen is here to stay, and the Bank of Japan will continue to drag its feet in raising rates, while at the same time other DM central banks, led by the ECB and BOE and ultimately the FED, will pivot in their monetary policies.”

Foreign PolicyWhat Raisi’s Death Means for Iran’s Future

“Iranian President Ebrahim Raisi died on Sunday when a helicopter carrying him and a delegation of other Iranian officials crash-landed in the mountains of northern Iran, throwing the future of the country and the region into further doubt.”

What we think

Last week we said… “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.”

Taking into consideration the culmination of US data, being an increased unemployment rate, lower jobs added to the payroll, softer inflation, and less consumer spending, the Dollar is in a position where we could see it begin to slide even further into the future, leaving space for the Rand to push stronger.

With that being said, we are nearing election week locally, and while from the outset, we are currently in a phase of economic efficiency (when compared to how dire things can get), we will need to see how the dust settles following the election, before maintaining any longer-term views on the Rand.

Our Range for the week: R17.98 – 18.28.

Have a great week ahead.