July 15, 2024
MyCURRENCY News | Week 29 2024
What we know
We all know the saying, “two sides of the same coin”, and it is no different when looking at currency markets. On the one side, we witnessed a strong Rand throughout last week, and on the other, a weaker Dollar; both of which have allowed the Rand to continue to trade with a positive bias.
When it comes to the Rand’s movements, it’s not always clear what the main drivers are. However, on this occasion, the cause-effect relationship is easy to see:
- The outcome of our national election was desirable. In fact, about as positive a result as we could have reasonably hoped…the consequence being that Rand-denominated assets have now become relatively more attractive. Following the noise (market volatility) around the general elections, a sense of stability has emerged, and local sentiment remained positive into last week, allowing us to trade from an open of R18.12/$ to a close at the end of the week of R17.91/$.
- Elsewhere, we saw a weaker dollar on the backend of softer US inflation that printed at 3% instead of the forecasted 3.1%. While the change was relatively insignificant, it is the second consecutive month of lowering inflation, and does bring the FED taking a dovish stance on interest rates closer to being a reality; potentially reducing the future appeal of lower-yielding USD denominated assets.
Given that the Rand’s rally has been borne out of positive political developments and improved sentiment for the country’s prospects, we suspect that the market will now require different catalysts to see further gains.
The heavy lifting for the Government of National Unity starts now and only positive developments and signs of job creation, economic growth, SOE efficiencies and crime reduction in the medium term will allow the current optimism to continue.
What others say
News24 – Foreigners buy South African bonds at a rate not seen in years
“Foreign investors bought the most South African government bonds in more than two years on Thursday, attracted by yields among the highest in emerging markets as the Federal Reserve gets closer to cutting interest rates.”
Zero Hedge – The Great Monetary Pivot Of 2024
“With the soaring interest expense on the federal debt set to become the largest item in the budget, I do not expect the Fed to raise interest rates much more”
Business Live – Markets bet on Trump election win after shooting
“Attack on Republican presidential contender may have tipped scales in favour of his return to White House.”
What we think
Last week we said that…“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”
With the market opening at R17.91 to the Dollar, and some local stability assisting the Rand in pushing stronger last week, we may see some follow through on this sentiment playing out this week.
As our local politicking begins to have less impact on the market, the Rand will start taking more of its direction from the Dollar as markets look tentatively towards the FED’s interest decision, and macro-market drivers that impact this. The market is still reacting slightly to some US election progressions; however, we don’t believe that anything thus far has been market moving.
Presently, we are looking toward how the Dollar interprets the recent attempt on Trump’s head.
In terms of calendar news, we have our local interest rate decision which is forecast to remain flat at 8.25%. Globally, there will be Retail Sales figures out of the US, Inflation out of the UK, and the EU interest rate decision.
Our range for the week: R17.75 – R18.20.
Have a great week ahead.