October 07, 2024
MyCURRENCY News | Week 41 2024
What we know
After 13 consecutive days of gains, the Rand struggled to maintain its momentum against the Dollar last week. We started the week at 17.10, not far from the 17.00 big figure that was tested the previous Friday. Throughout the week the Rand slipped against the Dollar losing nearly 40 cents to end the week at 17.47 against the greenback.
We received little in terms of financial data from the US last week other than employment figures on Friday. The US job market soared following the recent interest rate cut with 254,000 jobs added to the payroll in October, almost doubling the expectation. Despite the volatility that generally follows this release (we initially saw the Rand move to 17.60) the Rand was able to hold firm on Friday, closing the day at approximately the same level that it opened.
Earlier in the week, with no local news to halt the Rands’ recent positive momentum, the change in direction was due to the Dollar benefiting from its safe-haven status in the face of extreme geopolitical uncertainty. Similarly, the gold price continues to consolidate near its recent all-time high, with a break higher possible should risk aversion pick up further.
What others say
Axios – How Oct. 7 changed everything
“One year after the largest massacre of Jews since the Holocaust, the bloodshed continues with no end in sight. Israel could soon be fighting the longest war in its 76-year history.”
Reuters – Dollar holds gains made on US jobs data and Middle East flare-up
“The dollar’s gains followed a U.S. jobs report that showed the biggest jump in six months in September, a drop in the unemployment rate and solid wage rises, all pointing to a resilient economy and forcing markets to reduce pricing for Federal Reserve rate cuts.”
Daily Maverick – After the Bell: The David and Goliath battle over a Transnet terminal
“The issue is whether the KwaZulu-Natal High Court in Durban should intervene in the R12bn contract agreed by Transnet with Philippines-based International Container Terminal Services, Inc (ICTSI) to run Durban’s Terminal Two container port for 25 years.”
Visual Capitalist – Mapped: Just Five Countries Make Up Half of Africa’s GDP
“Africa’s GDP stands at $2.8 trillion in 2024, the combined economic output of 1.4 billion people. But not all of that productivity is distributed equally.”
What we think
Last week we said that, “…from a technical standpoint, the market is closing in on the R17.00/$ big figure and being short of local news releases this week and maintaining positive sentiment, the market could be drawn to test this level.”
How wrong we were. While the Rand was well positioned to test the 17.00 level, global risk aversion took the spotlight and the accompanying Dollar strength was able to outshine any positive Rand sentiment, leading to a retracement of some of our recent gains.
This week we look forward to the minutes of the recent Fed meeting being released, which will give more insight into the thinking surrounding interest rate decisions in the coming months. Interestingly, despite the meeting having taken place only a few weeks ago, these minutes may be less relevant than usual. The reason for this is that less than a week ago, following the recent 0.50% Fed cut, the market was pricing in a 65% chance of another 50bp cut next month, compared to a 35% chance of a 25bp cut.
Following Friday’s significantly better-than-expected Non-Farm Payroll report (along with a lower unemployment rate), expectations have now shifted to a near-certain 25 bp cut (with a 92% probability), compared to an 8% chance of no cut. A 50 bp cut appears to be off the table. This shows just how volatile economic data releases and forecasts continue to be as the US economic cycle turns.
Our range for the week is: 17.20 – 17.60.
Have a great week ahead.