June 10, 2024

Currency News

MyCURRENCY News | Week 24 2024

MyCURRENCY News | Week 24 2024

What we know

The Rand had quite the bumpy ride, essentially closing trading last week where it opened at R18.83 to the Dollar and traded within a 53-cent range throughout the week, between a low of R18.47 and a high of R19.00.

We believe that the volatility comes from three places: the first being the unfolding of our elections locally, the second being from US employment data, and the third – and really the most influential at the moment – uncertainty.

The mere fact that the Rand closed the week where it opened speaks to the level of uncertainty in the market at present. To add to this narrative, it appears that within the scope of an election outcome, Ramaphosa and the ANC are leaning towards a “Government of National Unity”, which seems like a way for the ANC to see as little diffusion in their power as possible. While this hopefully means we will avoid the worst-case scenario of an ANC + EFF/MK coalition, the impact of any future arrangement on the currency remains to be seen.

A large driver out of the US, non-farm payroll, overshot expectations with 272K jobs being added to the payroll compared to the 182K expectation. This release comes with an ambiguous outcome as the US unemployment rate increases from 3.9% to 4%.

The positive non-farm figure led to the Dollar Index seeing a 0.85% gain on Friday, which would generally relate to the weakening of the Rand, although we saw the Rand hold steady following the release of these figures, which is a strong sign for the Rand going into this week.

What others say

ReutersEuro slides to one-month low as Macron calls snap French election

“The euro fell sharply on Monday, hit by political uncertainty after French President Emmanuel Macron called a snap legislative election.”

MoneywebThree reasons why US financial markets are cruising through a long Fed hold

“Financial markets continue to digest what Chair Jerome Powell calls ‘restrictive’ policy very well.”

The GuardianUK unemployment rising at fastest pace of OECD countries, analysis shows

“TUC says only Costa Rica had similar increase in first quarter as ONS data expected to show further rise in April.”

What we think

Last week we said that “…it’s been some time since there has so obviously been a more important driver of the Rand than the performance of the USD; however, that is clearly now the case as investors keep a close focus on any headlines relating to coalition talks”

We enter this week with a similar sentiment and expect that the market will react accordingly to new information, as it gets released. However, we do have inflation figures out of the US which could add some pressure on the ZAR, should inflation print higher.

Another consideration is the ECB interest rate cut last week; this follows other countries that have cut their interest rates, namely Canada, Switzerland and Sweden.

With interest rate cuts increasingly at play globally, if the US hold interest rates higher for longer, this is going to play in the Dollar’s favour, as investors can expect to keep higher returns on their dollar-denominated assets.

From a technical standpoint, the market found some resistance around the R19.00/$ big figure, and the question is whether that is sufficient for the market to trend lower, or if this level needs to be tested again, and possibly breached.

Our range for the week: R18.65 – R19.10.

Have a great week ahead.