October 02, 2023
MyCURRENCY News | Week 40 2023
What we know
Despite very little news out locally or globally last week, we still saw the Rand trade in a wide 3% range against the Dollar, reaching as low as R18.70/USD and as high as R19.26/USD. As has frequently been the case this year, we saw the Rand taking its direction from the USD Index which printed yet another new high for the year following its 11th consecutive week of gains.
Important to note is that, while the Rand weakens when the USD index strengthens (and vice versa), the size of the move is typically magnified. As such, even though USD moves may not always be that large, South African investors experience them as a highly volatile Rand!
Volatility will remain if market sentiment towards global risk, US growth, and the Fed’s rate outlook continues to swing. However, our view is that while the timing of the “rates higher for longer” scenario may be uncertain, the rampant USD will revert into a broad 101 – 106 trading range in the coming months.
Locally, attention is once again starting to turn inwards towards the state of the country’s finances. The mid-term budget speech will take place on 1 November, and this is always widely anticipated by market participants as one of the important events of the final quarter of the year. Given that the potential for disappointment always appears to be likely, this certainly presents a risk to the Rand’s short-term prospects, especially towards the end of this month.
What others say
Bloomberg – Sunak faces cabinet split on taking UK out of human rights pact
“Sunak has made stopping small boats carrying asylum-seekers arriving from France a key priority he wants voters to measure him by. Deporting arrivals to Rwanda is a central part of that policy, but the Strasbourg court that oversees the ECHR has intervened to block the effort.”
Daily Maverick – Eskom’s broken heart — inside the leaking procurement systems that keep South Africa in the dark
“In early July 2023, Daily Maverick was approached by a whistle-blower who claimed to hold significant documentary evidence of corruption and maladministration in Eskom’s ‘informal’ or ‘low-value’ procurement systems. Over the next few months, we would discover not only that these claims held up, but that National Treasury was as much to blame for the situation as the power utility itself.”
Visual Capitalist – The $109 trillion global stock market in one chart
“Global equity markets have nearly tripled in size since 2003, climbing to $109 trillion in total market capitalization. Over the last several decades, the growth in money supply and ultra-low interest rates have underpinned rising asset values across economies.”
What we think
Last week we said that “(t)here’s not much first tier data out this week and we will likely take direction from US data releases. 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.”
Once again, there are no local data releases to speak of; however, there will be comments from a number of Fed members, including Chairman Powell as well as ECB President Lagarde, which will all be closely watched. Although data releases are few, it’s once again time for the all-important monthly Non-Farm Payroll release on Friday. A strong number would take the USD index back to last week’s highs, while a disappointing figure (depending on the quantum of course) would hopefully see the USD retreat 1% – 2%. We therefore expect a fairly quiet start to the week, with the potential for more significant moves on Thursday and Friday.
Our range for the week: R18.75/USD – R19.20/USD.
Have a great week ahead.