November 04, 2024
MyCURRENCY News | Week 45 2024
What we know
Last week we experienced yet another consecutive week of range bound trading in the final week before US elections as well as an interest rate decision, disrupted only by a soft release of employment figures on Friday. We saw a range of 25 cents throughout the week, closing at 17.63, almost the same as the opening level of 17.62.
The major move of the week was due to Non-Farm Payrolls from the US with the employment figure printing vastly lower than expected; only 12,000 jobs added to the payroll compared to the expected 113,000 and the previous figure of 223,000. Although this caused a brief spike in volatility, there seemed to be few lingering effects of such an underwhelming release in the short term as the Dollar was able to push back again towards the close of trading on Friday.
Additionally, from the US, Quarterly GDP printed slightly lower than projected at 2.8% indicating a general slowdown in the economy over the medium term. Month-on-month CPI was slightly higher compared to last month’s figure but came in exactly as expected for this release.
With the election being the focus of news globally, we are now as close as ever when it comes to trying to decipher which way the result will go. We won’t pretend to know what the result will be but the below graph (electionbettingodds.com, 2024) shows how close both candidates are to being able to pull through a win.
The Eurozone saw stronger-than-expected results in its releases, with YoY (0.9%) and QoQ (0.4%) GDP figures exceeding both the forecast and the previous release.
This is following a string of interest rate cuts over the last few months since June. The Pound market lost some ground to the EUR and other major currencies last week following the budget release, which also saw a spike in short-term borrowing costs as markets adjusted expectations around the upcoming interest rate decision.
Locally, the medium-term budget speech had a negligible impact on the week’s trading activity with the trading day on Wednesday opening and closing very close to the midpoint of this week’s range. Despite projections for better growth prospects over the next few years, the good news was dampened by an increase in expected budget deficit and higher debt forecasts.
What others say
Reuters – UK gilts face worst week in months as budget rattles investors
“Two-year gilt yields , which led the selloff as investors pared back rate cut expectations, have risen 26 basis points on the week, set for their biggest weekly increase since June 2023.”
Verity – Botswana: Ruling Party Loses 58-Year Majority
“Botswana’s ruling Botswana Democratic Party (BDP) has lost its parliamentary majority for the first time in 58 years, coming in fourth place in Wednesday’s general election.”
Reuters – South Africa sees wider deficits, higher debt in budget review
“In the first budget review since the African National Congress (ANC) lost its ruling majority and formed a coalition government, the National Treasury said it saw the consolidated deficit at 5.0% of national output in the fiscal year that ends in March 2025, wider than the 4.5% deficit forecast in February.”
Verity – UK: Kemi Badenoch Replaces Rishi Sunak as Conservative Leader
“Kemi Badenoch on Saturday became the UK’s new Conservative Party leader, defeating Robert Jenrick by 12,418 votes.”
BBC – US election 2024: A really simple guide to the presidential vote
“Americans are heading to the polls to elect the next US president – 75 million have voted so far in an election that is being closely watched around the world.”
What we think
Last week we said “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.”
The week will start off with the US elections, which could move the needle when it comes to Dollar strength or weakness depending on how the market interprets the results. A Trump victory could have more bullish result on the Dollar in the short term. It is worth noting that numerous economists have pointed out large gaps when it comes to the candidates’ proposals on economic policies.
Later in the week, the FOMC will announce their interest rate decision and confirm whether we will see the widely expected rate cut which is now at nearly 100% probability. With markets having almost fully priced in the cut, it is unlikely that we will see large movements in the exchange rates as a result of the final announcement on Wednesday.
We will also keep an eye on the interest rate decision from the Bank of England. Following the cut in August it is still projected that the rate will be decreased by 25 basis points to 4.75% on Thursday.
Our range for the week is: 17.35 – 17.75.
Have a great week ahead.