October 22, 2024
MyCURRENCY News | Week 43 2024
What we know
The USD continued its strength last week, leading the USD.ZAR exchange rate to rise from an opening level of R17.36/$, which was the low for the week, to a high of R17.79/$. The ZAR strengthened slightly towards the end of the week, trading to close at R17.54/$, around the mid-point of the weekly range.
Last week’s move was still very much in the scope of a healthy market retracement, and with local sentiment remaining positive, it feels as though we would need to see sustained Dollar strength for the Rand to trade close to the R18/$ level.
Global interest rate cuts continued with the ECB cutting the EU lending rate from 3.65% to 3.40%. The response was fairly insignificant, as the market appeared to have priced in this cut in the weeks leading up to the announcement.
US retail sales data was better than expected, which added to the Dollar strength last week. With USD consumer spending on the rise and lower unemployment in the US, sentiment towards the Dollar has continued to improve over the past couple of weeks.
Locally, with a lack of fresh news announcements, and no market-moving releases, the Rand had another quiet week and took most of its guidance from the Dollar.
What others say
Business Tech – Medium-Term Budget 2024 – what South Africans should expect
“South Africa’s improved revenue collection, the potential for a smaller budget deficit and inflation changes will likely be key parts of the upcoming mini-budget, but infrastructure issues and global risks could still impact economic growth.”
Reuters – Europe’s banks under investor pressure to keep earnings growth alive
“Besides looking for evidence of asset quality resilience, they are seeking sharper strategy, lower costs and the potential to outperform in a low growth global economy.”
FX Street – Gold pushes higher on increased safe-haven demand as Middle East conflict intensifies
“Gold rallies as investor demand for safety increases due to the deepening conflict in the Middle East.”
What we think
Last week we said, “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%.”
The consensus for the US interest rate decision still lies firmly in favour of a 0.25% cut for the FED’s next meeting in the first week of November, and with US sentiment turning a corner, this announcement becomes even more prominent.
A big highlight locally next week will be the first medium-term budget speech since the election of the Government of National Unity. This will take place next Wednesday and the market is likely to have a very close eye on this. Given the significant uptick in sentiment towards SA (both locally and from abroad) since June, this address presents an opportunity to inject further positive impetus into the current (relatively) positive narrative regarding the country’s prospects.
Globally EUR, USD and GBP manufacturing and services data will be released throughout the week, which could give insights into the health of the respective economies and potentially see an uptick in volatility. Tomorrow will see the Bank of Canada’s interest rate decision, with expectations of a cut from 4.25% to 3.75%.
Our range for the week: R17.30 – R17.70.
Have a great week ahead.