September 26, 2023
MyCURRENCY News | Week 39 2023
What we know
Last week started off in bumpy fashion for the ZAR with us retracing back above the R19.00/USD level bright and early on Monday morning. Fortunately, by Tuesday the overall downward trend had taken hold once more, and the ZAR continued to push down to as low as R18.68/USD – albeit during after-hour trading in the lead-up to the US Fed rate announcement. Despite the unpredictable ebb and flow of the currency, we managed to close out the week positively at R18.75/USD.
Following the US Feds decision to hold rates flat at 5.50% on Wednesday evening, Jerome Powell, in archetypal Fed manner and using his trademark evasive language, avoided directly answering the question whether he expected a ‘soft landing’ for the US economy. Though, all his other answers point to an air of cautious optimism, that given the tools at its disposal, the Fed can bring inflation in line by next year without plunging head first into a recession. The Fed does still hold some ammo in its arsenal, with members speaking of the likelihood of one or more rate hikes this year.
Locally, Governor Kganyago moved in step with Powell and held the SARB’s rates steady at 8.25%. However, he maintains an ever cautious stance, always ready to crack the whip should inflation raise its ugly head. Mention was again made of the disproportionate food and energy inflationary pressures on our economy – the likes of which are not being helped by the shortage of oil in the market. Russia’s ban on all petrol and high-quality diesel exports has played no small part in the matter. Oil prices have been climbing steadily through September and are nerve rackingly close to reaching $100/barrel again.
The international market continues to be weighed down by Chinese growth prospects and contagion by Evergrande’s ever more likely liquidation. Evergrande’s last minute postponement of meetings with key creditors on the notion that it must revisit its restructuring plan, adds insurmountable pressure not only to a sector with already dismal demand, but to greater global growth too.
What others say
Bloomberg – US Dollar emerges as best haven from American Government shutdown fears
“With the Federal Reserve determined to keep interest rates higher for longer, investors are finding few places to hide apart from the world’s reserve currency.”
Visual Capitalist – 200 years of global gold production, by country
“Then, South Africa took the helm thanks to the massive discovery in the Witwatersrand Basin, now regarded today as one of the world’s greatest ever goldfields. South Africa’s annual gold production peaked in 1970 at 1,002 tonnes—by far the largest amount of gold produced by any country in a year.”
IB Times – US Congressional leaders rush negotiations to avoid government shutdown
“If lawmakers don’t approve by Sept. 30 legislation to fund government activities in the next fiscal year, several federal branches will have no money to continue operating. It could mean furloughs in Social Security, no paychecks for millions of federal workers and impacts such as closed parks and even flight delays.”
What we think
Last week we said that “With the market moving below the R19/USD level on Friday and closing the week at R18.95/USD, it is certainly speaking toward our hypothesis that we may see the USDZAR move into the mid R18s, but not without help from the upcoming economic releases. In the company of the FED rate decision on Wednesday, and the MPC rate decision on Thursday, we can reasonably expect that markets may consolidate around the higher R18’s”.
There’s not much first tier data out this week and we will likely take direction from US data releases. The two major points of interest will be US GDP figures out on Thursday afternoon as well as their Core PCE Price index. Our own balance of trade data for August is due on Friday afternoon and is expected to have eased slightly from R15.98billion, though still in positive territory at R8billion.
Looking forward, we have Non-Farm Payroll out next week Friday, and would hope that given this is two weeks away, that this short week passes quickly without too much volatility being experienced.
Our range for the week: R18.65/USD – R18.95/USD.
Have a great week ahead.