August 15, 2022
MyCURRENCY News | Week 33 2022
What we know
Gone, but not easily forgotten; Trump may have left office some time ago but still manages to keep popping up onto the controversy radar. The US is tasked once again with extricating fact from fiction as the newest revelation regarding Trump’s hoarding of classified documents at his Mar-a-Lago home hits the press. The former president has already taken to his favourite playground (truth), announcing his innocence, and asking everyone to play nice as he’s not quite sure what he’s done wrong.
Last week may have felt like a week with two Mondays, but that couldn’t stop the Rand from running rampant and rallying on the back of the softer than expected US CPI. It came in 0.6% lower than expected at 8.5% and the market immediately started cutting forecasts for the next Fed meeting by 0.25%. This of course aids not just the Rand but the greater emerging market, though the Rand, as if a rubber band, outperformed the Dollar Index (DXY) substantially. The DXY gave up about 1.25% on Wednesday while the Rand moved as much as 3% in the same breath, down to R16.11/USD.
As the war in Ukraine rages on, there is some encouraging news as wheat exports commence from various Ukrainian ports, most importantly Odessa. Food security has been a major concern for those that relied on imports from the Slavic state. Interestingly, on the other side of the coin, Russian bonds have begun trading again in the US, albeit under strict guidelines and primarily so clients and their respective brokers can deleverage their Russian exposure.
What others say
Moneyweb – China-US tensions: how global trade began splitting into two blocs
“Speaker Nancy Pelosi’s visit to Taiwan has elicited a strong response from China: three days of simulated attack on Taiwan with further drills announced, plus a withdrawal from critical ongoing conversations with the US on climate change and the military. So where does it leave trade between the world’s two leading powers?”
Bloomberg – House Democrats ask Intelligence Chief to assess Trump documents
“They cited an unsealed court-authorised search warrant and the inventory of property recovered at Trump’s Mar-a-Lago Club that describe numerous classified documents he held, including “top secret/sensitive compartmented information,” among the most highly protected information in the US government.”
Visual Capitalist – Which countries produce the most wheat?
“Wheat is a dietary staple for millions of people around the world.
After rice and corn (maize), wheat is the third most-produced cereal worldwide, and the second-most-produced for human consumption. And considering wheat’s importance in the global food system, any impact on major producers such as droughts, wars, or other events, can impact the entire world.”
What we think
Last week we wrote that “directional momentum may need to wait until Wednesday, when US CPI data comes out, although it is important to note that in such thin liquidity environments, volatility can rise if some unforeseen development generates a market reaction.”
The DXY has since regained its losses from last week and is trading at the same pre-CPI announcement level of 105.9. The Rand is holding its ground relatively well, having only bled off 1% of its gains. The optimist in us hopes this week cements the Rand below the resistance level of R16.50, though that ‘rubber band’ effect may mean a pullback after such a strong rally is plausible.
Despite the Rand having given up a portion of its gains, it does still seem to be offering some value down here, especially given the strong correction we experienced coming down over R1 on the USDZAR from above R17/USD.
This week does present a slew of news events with the most notable being UK unemployment on Tuesday, as well as EU GDP and US FOMC minutes being released to the public on Wednesday.
Our range for the week: R16.25/USD – R16.55/USD.
Have a great week ahead.