July 18, 2023

Currency News

MyCURRENCY News | Week 29 2023

MyCURRENCY News | Week 29 2023

What we know

Emerging markets are back in the limelight for now as the US dollar takes its foot off the pedal. Last week we spoke to the lower than expected Non Farm Payroll which pointed towards a constricting employment market in the US – a hopeful sign that US interest rate hikes have had their intended effect and that we now transition out of the current hiking cycle. This saw riskier assets such as the rand appreciate, but our most recent catalyst is what really put the ZAR on the front foot – US CPI for June came in 0.5% lower than expected, 4.8% vs the 5.3% figure in May. At present, the USDZAR is enjoying levels not seen since the beginning of April with it trading at R17.92/USD – just shy of a 5% rally since last Monday. 

As much as it pains us to sound like a broken record, loadshedding is still an important metric when evaluating the ZAR, especially from the global market’s perspective. The seemingly perpetual cold fronts finally exhausted our diesel supplies and the façade of little to no loadshedding could no longer be supported. The regression to stage 6 was swift and brutal, validating many solar panel owners purchases after some doubt may have started to creep into their minds, especially after such a significant capital investment.

What others say

IB TimesCollapse of Ukraine grain deal to have medium-term impact

“The collapse of the Black Sea export corridor, which allowed the export of more than 32 million tonnes of Ukrainian grain over the past year, should have little immediate impact but over the medium term create market tension and push up food prices.”

Business LiveTransnet breaks new ground in privatisation of SA’s ports

“Transnet announced that international terminal operator, International Container Terminal Services Inc (ICTSI), a R140bn-plus operator straddling six continents, as a partner in the 25-year partnership to also expand Pier 2 of the terminal.”

BloombergAfrican Central Banks to keep interest rates tighter for longer

“After acting aggressively for more than a year, officials in Nigeria and South Africa may increase borrowing costs, while those in Kenya and Mozambique are likely to stand pat. Ghana was viewed as a toss up between hike and hold.”

What we think

Last week we said that the “Non Farm Payroll figure printed at 209k which was 15k less jobs compared to the forecast.  This data point once again shows the battle the Fed faces, in balancing rate hikes while combating inflation and encouraging economic growth.” 

We have already spoken about US factors driving market movements, but we also have some domestic events this week that can hopefully assist with the positive momentum.  Local CPI data and the interest rate decision are due on Wednesday and Thursday this week respectively. Inflationary pressures are up in the short term, mostly due to our exchange rate skyrocketing and increasing the cost of goods. However, expectations are for inflation to have eased significantly on a yearly basis. Our CPI numbers will surely guide the SARB’s decision on Thursday as economists are almost split down the middle with their predictions about whether Kganyago will hold rates stable or raise the repo rate by 0.25%.

Our range for the week: R17.65/USD – R18.15/USD.

Have a great week ahead.