November 25, 2024
MyCURRENCY News | Week 48 2024
What we know
Last week was another week of relentless Dollar strength where any global events outside of the US fell into the background, as the market focused fully on the US economic and political landscape. The weaker Rand we witnessed was not so much a result of risk-off sentiment as much as heavier flows into the USD given the market’s outlook on a stronger US economy going forward.
Locally, the SARB took a conservative approach on their interest rate decision and cut by 0.25%. This makes sense given our inflation figure Month-on-Month was released as forecasted at -0.1%, and Year-on-Year came in at 2.8% versus the forecasted 3.6%. This prompted a response from the market that caused the USD.ZAR to trade from the high of the week at R18.39, to its close of R18.10 to the Dollar.
The US Dollar Index also traded stronger to a high of 108.071, and the Dollar is currently trading at levels not seen since November 2022, which can be interpreted in one of two ways:
- Scenario 1: The bullish trend continues and the market gears up for its next bout of Dollar strength.
- Scenario 2: Profit taking occurs; potentially because of global economics shifting or cooling off.
As far as data points went, aside from our inflation and interest rate decision locally, EU Manufacturing and Services data (German and French) was released on Friday, which was softer than expected and US Manufacturing and Services data was released, coming out stronger than previous released. This served as a catalyst for the EUR.USD to break out of its 2-year range, moving it closer to parity once again.
Crypto markets were also a focal point last week as we found ourselves in an interesting situation where Chair of the US SEC, Gary Gensler (who was evidently against crypto) stepped down, leading to a rally in the crypto markets.
What others say
CNBC – What Trump’s historic election victory means for the global economy
“Speaking to his supporters in Florida early Wednesday, Trump said an “unprecedented and powerful mandate” would usher in “the golden age of America.”
Reuters – British home prices to rise faster than inflation, rents even more
“Urban rental costs were predicted to increase faster than prices, rising 4-5% next year and so squeezing the budgets of prospective purchasers.”
Moneyweb – SA business mood brightens to best level since March 2022
“South African business sentiment rose its highest level since the first quarter of 2022, as constant electricity supply and political stability supported better business conditions.”
What we think
Last week we said… “Looking at this week, and the lack of any US data points, we would expect to see the USD cooling-off and allowing the Rand to recoup some of its losses from last week.”
It is difficult to imagine another week where the Dollar pushes 1 – 2% stronger as Trump’s policy implementation will not be a short-term process. Regardless of how well the US economy may be doing from the outset, there will be the internal battle between Jerome Powell and the FED managing monetary policy efficiently, and Trump’s intention to reduce taxes and increase government spending.
We find ourselves in a market that is somewhat irrational and reactionary, and the best rendition of a phrase we are all familiar with is, “monkey say, market do”.
Some insight can be taken that most ZAR weakness is reflective of a stronger USD, and this can be deduced by the ZAR holding most of its gains across the board, which keeps the Rand in a good position going forward.
With a slow week on the horizon regarding data points globally, a range-bound market may be the reality.
Our range for the week: R17.75 – 18.30.
Have a great week ahead.