September 16, 2024
MyCURRENCY News | Week 38 2024
What we know
After yet another week of range-bound trading, the ZAR.USD closed the week at 17.74. This was less than 10 cents down from the week’s open of 17.83 despite having tested the 18.00 figure on Thursday morning, before a sharp recovery in the afternoon.
Having started last week on the front foot, by Friday we had seen the USD retreat towards the bottom of the past month’s range. US CPI came in just short of the expected 2.6% and, as the final major piece of data ahead of Wednesday’s interest rate decision, was sufficient to increase the likelihood of a 0.50% rate cut: according to CME Fedwatch, the chance of a 0.50% cut has increased from 30% a week ago, to 59% today.
The ECB was next in line in the global rate cutting cycle. The decision last week was on par with expectations to lower the rate by 60 basis points which brought their benchmark rate down to 3.65%.
Locally, it was a quiet week in terms of significant, market moving data releases. However, news that Putin would consider a limit on exports in response to sanctions seems to have improved the Rands footing as a potential alternative trade partner if flows from Russia decreased.
What others say
Moneyweb – S&P 500 is surviving big tech’s slide as ‘other 493’ catch up
“Investors love to look at companies that are going from earnings declines to earnings gains,’ Michael Casper, an equity strategist at Bloomberg Intelligence, said.”
Moneyweb – Musk’s Starlink in talks with South Africa to start service
“Musk and Ramaphosa held talks over potential investments, the president told reporters on Friday.”
Morning Brew – New import rule targets Chinese retailers Temu and Shein
“Biden administration says it wants to decrease the number of packages entering the country with these exemptions.”
Reuters – Stocks firm, dollar sags as market ups bets on big Fed cut
“Global stocks edged up for a sixth day on Monday, in a week that is almost certain to see the start of an easing cycle in the United States that investors believe may begin with an outsized move.”
What we think
Last week we said that “…it is virtually certain that the U.S. will cut interest rates next week, but debate remains over the size of the cut. The market is split 75/25, favouring a 25-basis-point cut over a 50-basis-point cut, as outlined in the CME FedWatch report.”
This week, as is often the case, will be all about the Fed’s decision and comments on Wednesday. We’re now at a point where a 0.25% cut would likely see a USD rally; however, volatility is expected to pick up in the coming days, given the prediction of a 0.25% or 0.50% cut feels like a coin-toss.
Locally, the MPC will also be making a rate announcement on Thursday where we can also expect some relief in the form of a 25-basis point cut. Given this is largely expected and the MPC is usually fairly conservative in its outlook comments, we don’t anticipate this announcement having a significant impact on the Rand. Indeed, given we are still behind the major economies in terms of our cutting cycle, the positive impact gradual cuts may have on the SA economy could in fact provide further support to the current upbeat sentiment.
Our range for the week: 17.40 – 17.80
Have a great week ahead.