July 09, 2024
MyCURRENCY News | Week 28 2024
What we know
Last week the USD.ZAR continued to trade with heightened volatility and we saw a range of 70 cents. Trading opened just below the 18.00 figure and after some significant moves throughout the week, closed at 18.40. The market dipped into the 17.90’s early in the week and was met with resistance. However, the move above the 18.50 level was also unable to hold due to positive sentiment locally.
While these movements have, for the most part, been because of political events locally, the USD has not been all that stable. Federal Reserve officials were split in the June FOMC meeting, with some ready to cut rates and others willing to hike if inflation does not cool considerably enough. Needless to say, rates will likely not be cut until the 2% inflation target comes into view.
The US employment figures (Non-Farm Payroll) for June were weaker than expected coming in significantly lower than May, while unemployment crept just over the 4% level. The weaker dollar, after the release of the employment figures, gave room for the Rand to make some further gains later in the week.
Locally, the volatility resulted from tremors following the recent political overhaul with a united parliament that could not seem to agree how to divide seats in the economic powerhouse of our country. The Gauteng premier, however, decided to proceed to appoint a provincial cabinet without any executives from the DA.
What others say
Daily Maverick – As load shedding goes local, the power gap between rich and poor widens
“While some in SA celebrated more than 100 days without load shedding, our electricity problems are not over. The lived experience of many people, particularly in townships, has not improved at all. In addition, many of the electricity problems will become local and the elites will have no incentive to solve them.”
Business Tech – Massive problem for interest rate cuts in South Africa
“Inflation expectations in South Africa may have dropped, but they are still above the South African Reserve Bank’s (SARB) target, meaning that interest rate cuts may be harder to implement.”
Visual Capitalist – Visualised: Mid-Year Interest Rate Cut Forecasts for 2024
“At the beginning of 2024, several banks forecasted five or more interest rate cuts over the year, while the median projection for Federal Reserve policymakers was three quarter-point cuts by fiscal year-end in March. Now, it has pared this back to one rate cut this year.”
What we think
Last week we said that…“We have a big week in the US with FOMC on Wednesday and the non-farm payroll announcement on Friday, both of which could either rock the Dollar or set it up for smooth sailing throughout the rest of July”
In the absence of cooling inflation and unemployment creeping up steadily, it could well turn out to be a rocky July for the Dollar. Higher rates result in a strong dollar, offset by weak employment and subsequently a weakening jobs market leading to mixed signals in terms of directionality for the month ahead. US CPI figures being released on Wednesday will likely drive some Dollar movement this week.
Locally, a fully formed government of national unity, albeit without the DA in Gauteng may bring some much-needed economic stability. With that, the rand may shake off some of its volatility but whether real change is on its way remains to be seen.
Our range for the week is 17.85 -18.30.
Have a great week ahead.