February 12, 2024
MyCURRENCY News | Week 7 2024
What we know
Despite the USDZAR having traded in a ±25c range last week, it was refreshing to have it come to a close only ±10c or 0.6% higher than its open on Monday, closing out Friday at R19.02/USD. Though, please don’t misconstrue the tone of the above as a positive remark regarding the ZAR’s current whereabouts. Frankly, we are fortunate that since our fiscal downgrade to junk status by the rating agencies, the international market has generally been uninterested in our domestic shenanigans. This is ultimately a good thing given Ramaphosa’s uninspiring address on Thursday evening. We might as well rename it ‘Slogans Over National Accountability’ (SoNA) as the prevalence of political posturing far outweighed any constructive solutions to the myriad of issues facing SA currently.
We’re not too interested in delving into the details of SoNA, there are far more accomplished people who can do that and it’s also all just a bit depressing for our own liking. We’d much rather stick to lamenting the return of stage 6 loadshedding over the weekend – much lighter on the soul. (Excuse the pun, low hanging fruit and all that.) The irony of which is not lost on us following our Presidents remarks that “the end of loadshedding is finally within reach”.
Last week’s news events were quite mild compared to our usual standards which led to volatility remaining peculiarly low. The Dollar Index (DXY) closed out the week, for all intents and purposes, flat, while the ZAR did its thing and crept slowly back up to the R19/USD level over the course of the week. We continue to bear the brunt of general risk-off sentiment worldwide as rate guidance continues to point towards higher for longer, at least until job growth and inflation in the US starts to ease.
What others say
Daily Maverick – ANC’s old argument – It was all Mbeki’s fault; New argument – It was all Zuma’s fault
“Ramaphosa wants to paint a picture of a country that was in trouble before he came along and then everything turned around. With the best will in the world, I don’t think this is true.”
IB Times – NATO Chief calls on Europe to ramp up arms production
“Ahead of a key meeting of NATO defence ministers in Brussels and the second anniversary of the Russia-Ukraine war, Jens Stoltenberg insisted that “we need to reconstitute and expand our industrial base faster, to increase deliveries to Ukraine and refill our own stocks.”
Reuters – Dollar eases as market shrugs off inflation revision data
“Traders shrugged off revised U.S. monthly consumer prices that rose less than initially estimated in December. While underlying inflation remained a bit warm, the mixed picture did not alter the market’s outlook on the timing of Fed rate cuts.”
What we think
Last week we said that “While not a new or shocking revelation, the ZAR’s knee-jerk movements still leave us in awe – the Dollar Index appreciated by 1.51% from Friday while the USDZAR moved by a staggering 2.58%. That’s a large premium and disconnect for the ZAR and shows that risk off sentiment remains a key driver in the markets valuation of our currency.”
Uncertainty in financial markets almost always leads to choppy trading as market participants try to make heads or tails of where the next moves will take us. It’s one of the least fun times to be in the market and this is starting to feel like one of those times. If the USDZAR starts to find a trading channel, you can be sure it’s busy winding up to break in a new direction just when you start to feel comfortable.
Fortunately, this week should bring some certainty as we have a slew of data out internationally. The key event will be US inflation on Tuesday, but GBP unemployment and inflation will be close behind in driving market movements.
Our range for the week: R18.75/USD – R19.18/USD.
Have a great week ahead.