November 11, 2024
MyCURRENCY News | Week 46 2024
What we know
Last week was one of the first in a while where the market took minimal guidance from any economic data points as most of the world’s attention was focused squarely on the US elections.
According to ‘conventional’ wisdom, a Trump win should lead to a stronger Dollar, and that’s exactly how the market responded as the results started to come in, trading from R17.35 to the Dollar to a weekly high of R17.82 in the early hours of Wednesday morning.
The Rand managed to recoup most of its post-election losses, ending the week at R17.56. This recovery was partly due to the U.S. Federal Reserve cutting interest rates from 5.00% to 4.75% and positive local sentiment, which strengthened the Rand against most major currencies.
The Bank of England also made its interest rate announcement last Thursday, with a majority of MPC members voting for a cut from 5.00% to 4.75%, which brought USD and GBP interest rates to parity.
The EUR was also put on some rocky ground as German Chancellor Scholz dismissed his finance minister, collapsing the coalition government and potentially triggering early elections. This adds further uncertainty to a German economy struggling to show any moves towards significant growth.
Last week being incredibly quiet locally played to the Rand’s benefit, allowing it to trade at its strongest levels of the year against the NZD, GBP, EUR, CHF, and AUD.
What others say
CNBC – Op-ed: What to expect from Trump’s first 100 days when it comes to China
“Trump’s first 100 days are likely to be a rollercoaster, especially given his affinity for headline-grabbing moves. Experts predict a shift away from the structured, methodical diplomacy seen in the latter stages of the Biden administration.”
The Guardian – The collapse of Germany’s government will delight Trump – and his European friends
“Germany is already in its second year of recession. Its economic model is broken because of the end of cheap Russian gas and declining exports to China, which is increasingly an industrial competitor.”
Moneyweb – Fitch signals path for South Africa rating upgrade after budget
“Fitch also said it may revise the nation’s credit outlook if the government’s efforts to rein in debt improve as a result of Africa’s largest economy performing better than anticipated.”
Vatican News – Botswana: Shock election results end governing party’s 6-decade rule
“Africa analysts have pointed to the outcome of this election saying it should serve as a warning to other long-time ruling parties across the continent to heed the message that without economic progress and employment opportunities, political dominance will falter.”
What we think
Last week we said, “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.”
Following the Trump win, the Dollar rallied 2% stronger by trading from 103.450 to 105.420 as measured by the Dollar Index. Alongside a stronger Dollar, equity markets are looking stronger with the prospect of a healthier US economy under Trump’s rule, and crypto markets reacted in a very similar manner with Trump firmly expressing his support for cryptocurrencies and their integration into the financial system.
Locally, we have our unemployment rate being released this week, which is forecast to decrease marginally from 33.5% to 32.9%. As one of the biggest issues facing South Africa, and only a few weeks after a Medium-term budget speech presented under the auspices of a Government of National Unity, a steady decline in this figure simply must be a major priority moving forward.
US inflation figures will be released on Wednesday, with an address from Fed Chair Powell scheduled for Thursday. These events, especially in the context of a less than friendly Trump-Powell relationship, will be very highly anticipated as the market tries to glean some insight into the US monetary policy outlook as the year starts to wrap up.
There may be some follow through on the Dollar strength going into this week, however markets should settle as the inflow of new information gets digested.
Our range for the week: R17.20 – R17.75.
Have a great week ahead.