October 29, 2024
MyCURRENCY News | Week 44 2024
What we know
With the US election just about here, the USD managed to maintain its strong recent levels, with the Dollar Index (DXY) hovering around its best levels in 3 months. As such, the ZAR started the week at R17.54 against the USD and drifted slightly to close at R17.62. In between that, Wednesday saw the largest move of the week as we moved from 17.49 to 17.86 on the day, before the Rand regained its composure and eked out some gains to close the week.
Wednesday’s weakness was attributed to some short USD-long ZAR positions being closed out and, whether or not that was true, it did give a sense of some of the volatility that the ZAR can experience when global markets are somewhat nervous. Its strong run this year, combined with high liquidity, does make the ZAR an easy target for emerging market profit-taking when markets adopt a risk-off posture. As such, the current climate is simply not particularly conducive to the Rand being able to build on its recent gains just yet.
The global interest rate cutting cycle continued last week as the Bank of Canada reduced their benchmark interest rate by 100 basis points to 3.75%. The Bank of Canada have now cut rates for the fifth consecutive time since April.
As we approach the US interest rate decision on the 7th of November, the market is expecting an almost certain 25 basis point decrease in the Federal Funds Rate with a 98.3% probability and the remaining 1.7% allocated towards no change in the rate. This means that, once again, the comments from Chairman Powell should prove to be more significant than the rate decision itself, given the latter should very much be priced in.
What others say
Axios – Elections 2024: The big picture
“A (hopefully) useful link for (hopefully) balanced US election news.”
Daily Maverick – After the Bell: How the mini budget briefing came about (hint – I helped)
“In the press, we summarise this event as ‘the mini budget’. But in fact, that is something of a misnomer because in many ways it’s actually the maxi budget.”
Visual Capitalist – U.S. Dollar Performance Against Major Currencies in 2024
“In 2024, the U.S. dollar has experienced notable depreciation against many major currencies due to anticipation of the Federal Reserve’s first rate cut since the onset of the COVID-19 pandemic (rates were cut by 0.5% in September 2024). Lower rates can reduce the dollar’s appeal relative to other currencies, particularly those in economies with higher interest rates.”
Daily Maverick – Loaded for Bear: US presidential election has big implications for SA platinum group metals producers
“South African platinum group metals producers have a lot at stake in next week’s US presidential election amid talk of sanctions and tariffs.”
What we think
Last week we said, “…a big highlight locally next week will be the first medium-term budget speech since the election of the Government of National Unity […]and the market is likely to have a very close eye on this.”
The next week or two presents us with somewhat of an “all bets are off” scenario, as there are simply too many moving parts to make any meaningful forecasts outside of the recent short-term trading range: the local medium-term budget presentation on Wednesday, Non-Farm Payroll out of the US on Friday and the US election next Tuesday, will all take place against the backdrop of heightened global political tensions and two regional conflicts.
Tomorrow, we will hopefully get a clear sense as to how the GNU is handling fiscal spending and revenue collection. A decrease in fiscal debt will certainly be a goal (and important point to watch) which, if realised, will have a positive impact on the economy, with long-term follow through to the Rand.
The major data release will be the employment figures out of the US on Friday which is expected to come in at just under half of the previous figure, indicating a slowdown in economic activity that could weigh heavily on the Dollar. After a period of more consistently subdued US data, some of the recent data points have been somewhat more bullish. As such, should this figure print higher than expected, the recent USD rally may be granted some fresh impetus.
Other announcements this week include GDP and inflation figures from the Eurozone and MoM CPI from the US.
Our range for the week: 17.40 – 17.85.
Have a great week ahead.