January 20, 2025
MyCURRENCY News | Week 3 2025
What we know
The USD.ZAR exchange rate opened last week above the (dreaded) R19.00 mark and peaked at R19.22. It then tapered off to a low of R18.68, aided by weak US data points.
As things stood, prior to last week, the Dollar enjoyed strong support due to expectations of reduced interest rate cuts, robust employment data, and anticipated policy implementations by Trump post-inauguration. Subsequently, the market has been pricing in the positive US sentiment, and as such, weaker-than-expected data points are weighing on the Dollar amidst an ever-changing economic climate.
Last week saw the release of various US inflation data, with mixed results. On balance, the figures came in softer than expected, which weakened the USD and strengthened the ZAR in response.
UK inflation and GDP figures were released last week, and both yielded a softer-than-expected outcome, leading to a fall of over 2% in the GBP.ZAR exchange rate.
Leading on from this, a trend we are seeing is that Central Banks globally continue to struggle with balancing consistent inflationary pressures against their monetary policy decisions.
Locally, we had a very quiet week with no new announcements, and the ‘no news’ trend played to our advantage as the ZAR managed to recoup some of its recent losses and outperformed a basket of emerging markets.
What others say
Reuters – Triumphant Trump returns to White House, launching new era of upheaval
“Donald Trump will be sworn in as U.S. president on Monday, ushering in another turbulent four-year term with promises to push the limits of executive power, deport millions of immigrants, secure retribution against his political enemies and transform the role of the U.S. on the world stage.”
BusinessTech – Ramaphosa’s urgent message to businesses in South Africa
“President Cyril Ramaphosa met with business leaders and business groups last week, making it clear that the government’s partnership with the private sector is setting job creation as its end game – and he wants results fast.”
BBC – Hamas releases first Israeli hostages after Gaza ceasefire takes effect
“The three-phase deal was brokered last week by the US, Egypt and Qatar, where the foreign ministry spokesman said it was a “deal for hope” and the ‘last chance for peace’.”
What we think
Last week we said… “This week we look forward to Inflation data from the US, which could easily urge the Dollar higher. With fewer projected cuts this year, even a slight uptick in inflation may not be enough to slow the Dollar.”
Regardless of CPI printing softer than expected, and the Dollar weakening over the course of last week, markets remain in suspense ahead of Trump’s inauguration, and with this the anticipation of stringent trade policies that are likely to add fuel to the Dollar’s fire.
The general expectation is that the USD will remain overvalued due to the proposed tariffs under Trump’s trade policy. This is raising growing concerns about the devaluation of the currencies of its major trading partners.
Locally, our inflation figures will be released this week, which will give some insight into how the SARB is managing inflationary pressures.
Manufacturing and Services data points out of the EU and UK will also be released this week, and a big point of focus in Asian Markets will be BoJ interest rate decision on Friday.
Our range for the week: R18.55 – R19.10.
Have a great week ahead.