September 02, 2024
MyCURRENCY News | Week 36 2024
What we know
The Rand Dollar traded in a tight range last week, closing at R17.80 – only 12 cents weaker than its open of R17.68. Overall, the range was quite contained until we saw larger moves on Friday, widening it to a total of only 20 cents.
Economic data was scarce and difficult to come by last week, and what little news we did receive had little impact on weekly trading. As one of the world’s major economies continues to cool, the US reported soft GDP data on Thursday. Although the release was slightly higher than the forecasted 2.8%, it was not significant enough to have any meaningful impact on the Fed’s decision to cut rates in September.
As expected, the ZAR was able to stand its ground against the USD and was mostly range bound before pushing stronger on Friday to a low of 17.60 subsequently weakening towards the end of the trading session. We saw softer data locally where the budget balance swung from positive to negative since the prior release and the balance of trade was slightly down.
What others say
Reuters – Swiss franc carry trade comes fraught with safe-haven rally risk
“A quick rally in the currency used to fund carry trades can wipe out gains and cause investors to rapidly unwind their positions, as the yen drama showed. High levels of volatility or a drop in the higher-yielding currency can have the same effect.”
Moneyweb – Sarb sees growth, CPI perks on power fix
“South Africa has recorded 155 days of sustained electricity supply, bringing an end to record power outages – known locally as load shedding – that crimped economic growth and forced businesses to raise prices to cover the cost of emergency power.”
Business Tech – Massive visa changes to draw more Chinese and Indian tourists to South Africa
“The DHA notes that Chinese tourists made over 100 million outbound trips in 2023 – but South Africa received only a minuscule 93,000 of these arrivals.”
What we think
Last week we said that,“With very little data scheduled to be released until Thursday afternoon…the question then arises how the market will respond to a (GDP) result which surprises, either to the upside or downside.”
The US GDP data was slightly more robust than expected, allowing the Dollar Index (DXY) to push stronger toward the end of the week. The “better than expected” GDP will not be strong enough to prevent a rate cut in September but may influence the magnitude of the expected rate-cut if we see more bullish data.
The Bank of Canada has its interest rate decision on Wednesday, and markets are anticipating another rate cut following back-to-back cuts in June and July, which brought the rate down to 4.25%. We can also look forward to the US employment figures on Friday, which generally invites increased volatility. Thursday’s ADP employment report will likely provide some indication of what is to be expected on Friday.
Locally, South African YoY GDP data will provide insight into whether the MPC will follow major economies and begin lowering rates in September, which we suspect it will.
Our range for the week: 17.70 – 18.10.
Have a great week ahead.