October 14, 2024
MyCURRENCY News | Week 42 2024
What we know
Last week saw further consolidation for the USD.ZAR with the close of the week at 17.36 being only 7 cents lower than Monday’s open of 17.43 and close to the best levels of the 17.34 – 17.67 range for the week. As the major news announcements were released in line with forecasts, markets seemed reluctant to pick a direction, as all the available information was somewhat “baked into the cake” already.
The Dollar managed to gain some ground before the release of the FOMC minutes on Wednesday. The FOMC minutes indicated that members were reluctant to implement another 0.5% interest rate cut in the upcoming November meeting, which supported the expectation of a 0.25% decrease in the lending rate, with the market now pricing in an 86% probability of a 0.25% cut.
Last week also saw the release of US CPI figures, which were largely in line with expectations with YoY CPI coming in at 2.4%, and edged closer to the FED’s ultimate target of 2%, while contributing to some positive Dollar sentiment as the US continues to manage their interest rate cutting cycle while bringing inflation slowly towards their target level.
With no significant news released locally, most of the week’s (very limited) market movement was Dollar related, leaving us with a muted week of trading.
What others say
Reuters – South African rand weakens, local data to have little influence
“The South African rand softened in early trade on Monday, and with few major domestic data points this week, the local currency will likely be driven by global events, analysts said.”
AOL – Rate cuts were supposed to push mortgage rates lower. The opposite has happened.
“The Federal Reserve’s jumbo interest-rate cut in mid-September was welcome news to prospective homebuyers, with the expectation that a lower federal funds rate would help push mortgage rates lower.”
CNBC – Jamie Dimon says geopolitical risks are surging: ‘Conditions are treacherous and getting worse’
“JPMorgan Chase CEO Jamie Dimon sees risks climbing around the world amid widening conflicts in the Middle East and with Russia’s invasion of Ukraine showing no signs of abating.”
What we think
Last week we said, “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.”
With broad consensus around a 0.25% Fed cut in November, it remains a waiting game to determine the likely future direction for the USD and ZAR. We anticipate a relatively quiet week with few data points from the US, the main focus being Friday’s release of US retail sales figures, which are projected to decrease from 1% to – 0.3%.
There will also be a focus on the Eurozone, with the ECB’s interest rate decision on Thursday expected to reveal another 25 bp rate cut following two cuts this year in June and September. The potential cut on Thursday will bring the Euro benchmark interest rate down to 3.4%.
Locally we can look forward to the SARB’s Monetary Policy Review, Retails Sales and Building Permits data – nothing that we would expect to be massively market-moving.
Our range for the week is: 17.20 – 17.60.
Have a great week ahead.