Welcome to another weekly dose of Rand insights!

This week saw the South African Rand on another rollercoaster ride as it fought back bravely in the middle of the week to retest recent 13-month best levels...

...only to stumble at the last hurdle and throw it all away - once again!

Non-Farm Payrolls once again provided the trigger for some serious volatility on Friday, as global markets got spooked by the surprising weak numbers, with stock markets seeing a week of reversals.

Let’s dive into some of the details and what it means for you going forward.

Key Moments (2 - 6 Sep 2024):

To give some of the key headlines and events over the past week:

• South Africa’s Mixed Signals: The economy grew just 0.4% in Q2 2024, falling short of expectations, but the current account deficit narrowed
• US Non-Farm Payrolls Spook Market: The U.S. added 142,000 jobs in August, below expectations, with downward revisal to previous months
• Stock Markets Tumble: Global markets took a tumble this week, reversing sharply after hitting new highs?

The Rand began the week at R17.78 to the Dollar, after weakening sharply the prior Friday, and initially weakened further to hit R17.93/$ before managing to pull things back in afternoon and after-hours trade, closing back around R17.80/$.

From an outlook perspective, our Rand prediction modelling was expecting some weakness going into the week, with a move above R18.00 anticipated, with 18.05 needing to be broken above to confirm more upside - see below

(enlarge here)

So the Rand was already moving in the right direction, but we were still expecting higher if our forecast was to be believed...

Tuesday dawned...

...and it didn't take long for the market to make its move, as the Rand lost ground from the get-go, pushing all the way to hit R18.01/$ after news hit that South Africa's GDP had risen by 0.4% in the 2nd quarter (after a flat previous quarter)...

...thankfully managing to keep on the positive side of the line, but only just!

The Rand managed to pull things back slightly in after-hours trade to close just below R17.95 to the USD.

Of course, this was another satisfying validation of our forecasting system (per chart above)...

...but it would need to be seen if that 18.05 level would hold or not!

And it almost looked we were heading that way on Wednesday, as the Rand weakened from early on to test 18.00...and then 18.02...

...but that is as far as it went, as the market reversed sharply, driving the price all the way back to R17.80 to the dollar, and managing to hold onto the gains to close just above this level.

In other news:

Global stock markets experienced significant declines as economic concerns weighed on investor sentiment...

...with the Dow falling around 700 points on Friday alone with fears of a potential recession, with tech stocks like Nvidia leading the downturn.

Both the S&P 500 and Nasdaq faced heavy losses, as did the FTSE and SA Top 40, reflecting growing uncertainty around U.S. economic data and the Federal Reserve's upcoming decisions

The question is: Is this the start of a major correction or will we maybe see some final upside before it happens?

Getting back to the currency markets, Thursday belonged solidly to the Rand.

There was some pressure in early trade, but once the SA desk opened, it was one-way traffic, as the market dropped throughout the day to hit new weekly lows just below R17.70/$.

Some 'encouraging' news was that the Current Account deficit for Q2 was not nearly as bad as expected, coming in at R65bn, sharply down from the R106bn deficit the prior quarter...

...that said, a deficit is never a good thing!

And then, all of a sudden, it was Friday, the day traders were waiting for - for the biggie for the month - US Non-Farm Payrolls.

Ahead of the release the Rand pretty much tracked sideways before volatility picked up a bit prior to the release...

...which when it came, showed that the US economy added 142,000 jobs in August 2024, more than a downwardly revised 89,000 in July but below forecasts of 160,000, with June also being downwardly revised by 61,000.

This seemed to really spook the market, with concerns that the economy has not been doing as well as it seemed (surprise, surprise), but also suggesting a rate cut was warranted sooner than later.

The Dollar Index plunged, and the Rand took advantage, as it thrust all the way to test R17.60/$, coming within a whisker of our invalidation level...

But then, in almost a carbon-copy of last week, the market reversed very strongly, as the Dollar took off...

...dragging the Rand by the scruff of the neck as it went!

In no time we were back above R17.80, almost touching R17.90, before the local unit managed to put the brakes on to close out the week just below R17.85 per dollar.

Another disappointing week for the Rand as it once again only flattered to deceive.

But one benefit was that both exporters and importers had some opportunity to take advantage of beneficial levels.

The Week Ahead (2 - 6 Sep 2024)

Looking ahead this week, there are few potential triggers, with US Retail Sales and Consumer Sentiment being paramount (apart from any political shocks as we close in on the elections), while the ECB's rate decision will be one to look out for.

Triggers apart, we are in a volatile period, especially leading into the US elections, and it will be necessary to keep your eyes firmly on the ball...

...and where the ball is likely to land up over the next few days and weeks!

Are You You Taking Action At The Right Time?

To give you a little helping hand, feel free to take our Rand forecasting service for a test-drive!

This will give you access to the same charts we are to give us and our clients the likely direction of the Rand - ahead of time, enabling you to make educated and informed decision.

Simply use the link below to get access now.

This will give you access to the same charts we are to give us and our clients the likely direction of the Rand - ahead of time, enabling you to make educated and informed decision.

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If you have any questions or feedback, please leave them below.

To your success~

James Paynter

P.S. Worrying about how to in manage your Rand exposures this year? Email me or give me a call on (041) 373-6310 or (087) 551 2848 - we would love to help.

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