December 11, 2024
MyCURRENCY News | Week 50 2024
What we know
Despite everything going on in the world over the past few months, it’s been a pretty dull time as far as the Rand is concerned. Following the move weaker post Trump’s election victory, and barring the odd, short-lived spike or dip, since 11 November almost all trade for ZAR.USD has taken place in a tight and predictable 18.00 – 18.20 range.
Last week was no different and as economic data releases start to slow down into year-end, the most likely catalyst for a break out of this range was going to be Friday’s Non-Farm Payroll data. This data point is closely watched, with significant deviations from expectations influencing the market’s view of the Fed’s next move with regards to interest rates. While the figure came in stronger than expected, part of this “bounce” was due to a recovery following the weak October release, impacted as it was by the Boeing strike and two hurricanes. Read in conjunction with an uptick in the unemployment rate, the main implication was an increase in the probability of the Fed cutting rates by 0.25% on 18 December, which now stands at 86%.
Despite this, the USD continues to hold firm, with the market possibly now consolidating and adopting a wait-and-see approach, given Trump 2.0 is set to launch (no SpaceX-related pun intended) in just over 5 weeks.
Elsewhere, just when it felt as though the geopolitical swamp couldn’t get any murkier, we saw the rapid fall of the Assad regime in Syria. Without delving into the details here (please see the article in the next section for a primer), this is an incredibly interesting turn of events in the context of current East-West power struggles. In isolation this could simply be perceived as the final move in a game of chess: checkmate, Assad is gone, game over. In the current climate however, it is probably more appropriate to view the fall of this dictator as simply the end of the previous game: the board has been reset, the pieces are now in place, and a new, more significant game is about to commence. The coming months will show how the US, Europe and Israel make their moves against the regional interests of Russia, Iran and Turkey.
What others say
Britannica – Uprising in Syria, 2011–
“Explore Britannica’s detailed account of the Syrian Civil War, tracing its origins from the 2011 uprising to its complex, ongoing impact.”
Reuters – China vows to ramp up policy stimulus to spur growth in 2025
“China will adopt an “appropriately loose” monetary policy next year, the first easing of its stance in some 14 years, alongside a more proactive fiscal policy to spur economic growth, the Politburo was quoted as saying on Monday.”
ING – Softish US jobs report favours a December rate cut
“US non-farm payrolls rose broadly in line with expectations after recent strike and hurricane distortions, but unemployment picked up by more than expected. With valid questions over the quality of the jobs the US is currently creating, we continue to expect the Fed to cut the policy rate 25bp on 18 December.
What we think
Last week we said that “…if (a bullish NFP) figure is realised it may provide even further Dollar momentum…(and) locally, we look forward to QoQ and YoY GDP data to provide insight into the state of the economy as we head into the festive season, which usually brings economic positivity.”
While the NFP figure was reasonably strong and South Africa’s GDP release was disappointing compared to expectations, this hasn’t translated into ZAR weakness.
Indeed, if not for a slight delay in writing this week’s commentary, the outlook for the week would likely have been for more of the same, uninspired 18.00 – 18.20 trading range. As it turned out, China’s announcement of a loose monetary policy next year provided a boost to the ZAR, which has allowed us to finally break through the 18.00 level. Having traded as low as 17.71 late on Monday, we have seen a slight pullback but, importantly, remain below 18.00 and hope to see some consolidation here. The next support level would be around the 17.60 area, which could prove to be a challenge for further gains.
Our range for the (remainder of the) week ahead is 17.60 to 18.00.
Have a great week ahead.