July 29, 2024
MyCURRENCY News | Week 31 2024
What we know
Last week saw muted trading in what seemed to be a week of consolidation for the ZAR.USD. The rand closed at 18.25 on Friday, only one cent higher than the week’s open of 18.24, with very little movement in between.
The only notable move was a brief visit to 18.50 where the resistance level seemed to hold and with the lack of any market moving news to break through this level, we traded back towards the opening level of the week.
There was mixed data coming out of the US last week with GDP coming out at 2.8%, 0.8% higher than expected, while MoM inflation doubled the forecasted figure at 0.2%. The most significant change was durable goods orders reflecting sentiment around longer-term purchases with a final figure of -6.6% MoM versus the forecast of 0.3%. This drastic decrease indicates a cooling economy with consumers possibly deciding to hold off on the purchase of durable goods until price levels become more favourable.
Locally, CPI for June was 5,1% down 0,1 percentage points from May indicating a steady decline in the increase in price levels and well within the 3-6% target range of the Reserve Bank’s Monetary Policy Committee.
While there was not too much in terms of a market reaction to Biden dropping out of the race, the revived enthusiasm brought on through the introduction of a new presidential candidate does create some more uncertainty around the upcoming US elections and how those results will affect Dollar trading.
What others say
Financial Times – Donald Trump’s dollar devaluation plan unlikely to prevail, say investors
“Donald Trump’s plan to devalue the dollar if he wins the US election looks “extremely unlikely” to succeed as it would be undermined by policies such as tariffs and tax cuts, according to investors.”
CNN – Markets tear up the popular trades that reached ‘stupid levels’
“The assumptions that have driven this year’s global financial markets are being rapidly rethought [as] investors are racing to redeploy money.”
Reuters – Fed likely to hold rates steady one last time as inflation fight finale unfolds
“Policymakers have said they should start cutting interest rates before inflation fully returns to their target, and if upcoming data stays in line with recent months they may be running out of time.”
What we think
Last week we said that…“The next interest rate decision from the FED comes at the end of July…pricing in a very high probability of the first cut to take place following the September meeting.”
With a July rate cut looking increasingly improbable, there seems to be an almost certainty being priced in by market participants for long awaited relief and easing of the restrictive monetary policy in September. Non-farm payroll figures on Friday will provide further insight into whether the projected rate cut is right on time or may be too optimistic from the FED.
This week we look forward to a rate decision in the UK as well, where they are expected to cut rates by 25 basis points to bring their interest rate down to 5%. According to recent data, the much anticipated first rate cut hangs in the balance with a surge in services inflation, which is central to their decision-making.
The South African Reserve Bank’s MPC are indicating that September may also be the horizon for local rates to start coming down following positive inflation data creeping ever closer to the targeted midpoint of the inflation target range.
Our range for the week is: 18.10 – 18.55.
Have a great week ahead.