October 30, 2023

Currency News

MyCURRENCY News | Week 44 2023

MyCURRENCY News | Week 44 2023

What we know

It was good to see a relatively large gain for the Rand this week, although in typical rand style – it was not linear. We saw the Rand open the week around the R19.00/USD level, revisiting this area as it waited for liquidity to give it some direction.  We then moved up to the weekly high at R19.27/USD before, quite magnetically, being drawn to the lower end of its recent range at R18.75/USD, a generous bout of strength to the tune of 2.7% for the rand.  

It did come as somewhat of a shock as the lack of optimism around the geopolitical landscape typically brings about risk-off sentiment among investors, implying that they would be turning to more developed economies in these times.  

While the strengthening rand did coincide with the dollar losing steam, it is important to note that the rand performed well last week seeing proportionally larger gains against other major currencies such as the GBP, EUR, NZD, and CHF. 

The week ahead is absolutely packed with important events and data releases.  First up is the Medium-Term Budget Speech on Wednesday, followed by the FOMC interest rate decision later in the day. The BOE releases its monetary policy and interest rate decision on Thursday, while the all important Non Farm payroll data arrives on Friday afternoon.  Any outliers here may rock the market. 

What others say

MoneywebAgoa talks: SA needs to carefully manage relations with the US and China

“South Africa must tread carefully in its economic relationships to avoid being caught in the escalating tension between east and west, and more specifically, China and the US. The country’s hosting and the outcome of the 2023 Agoa Summit should strengthen its role in diplomatic relations and contribute towards safeguarding the country’s economic interests.”

Visual CapitalistThe cities with the most bubble risk in their property markets

“Buoyed by low interest rates for the last decade, many property markets have seen substantial price growth since 2010. Experts warned that real estate bubbles—in which the price of assets moved up far beyond their intrinsic value—were forming.”

Daily MaverickGodongwana’s Medium-Term Budget Policy Statement likely to present a gloomy fiscal outlook

“Hope of “fiscal consolidation” has evaporated, with revenue flows reduced to trickles as the commodity windfall withers and the wider economy barely grows in the face of the unfolding calamity of state failure.”

Daily MaverickSiya Kolisi: Rugby, leadership and the power of one

“Over the past week, Springbok captain Siya Kolisi has shown some leadership qualities that only tangentially had to do with the actual winning of the games.”

What we think

Last week we said… “attention is shifting towards next week’s medium-term budget speech (MTBS) and the risks that entails.  It’s hard to recall when last we approached a MTBS with anything resembling optimism and we can only hope that there aren’t any severe negative surprises or revisions in store next week, and that the current bearish outlook is already priced into the Rand”.

When it comes to the Medium-Term Budget Speech, there is plenty of room for some adverse market reactions to any more doom-and-gloom pronouncements.  Essentially, we will get a better understanding on where government plans to allocate its resources in the next 2-3 years, and what this means for the medium-term outlook for South Africa. One can only hope that forecasted revenues are looking promising, and that plans to work towards decreasing our massive budget deficit, while maintaining growth prospects in the industries that fuel our economic growth, will be the key takeaway from this.  

In terms of economic drivers out of the US, the market expects the FED to hold rates constant again, and Non Farm payroll is expected to decrease from 336,000 to a mere 182,000.  We really hope not to see another massive positive surprise in this number (as we did last week) as this could see the USD rally once again.  

Our range for the week: R18.50/USD – R19.00/USD.

Have a great week ahead.