Welcome to another issue of your Weekly Rand Revie - as we say goodbye to April and hello to May...
...which happens to be election month, and somehow extra things always seem to happen in election years, or is it just me?
The Rand put on another sterling performance to hit a 5 month best, helped along by some good manufacturing news domestically...
...as well as a US dollar that lost some of its shine amidst some signs that the US economy is not doing as well had been expected.
Once again, providing some relief for local importers, consumers and investors to smile about...
...but giving exposed exporters some challenges in the process.
Let's dive in and see how it all happened.
Key Moments (29 Apr-3 May 2024):
There was quite a bit going on the past week, with below being some headlines that caught our attention:
- SA Trade Slumps but Manufacturing Improves :South Africa's trade slumped, but there was an encouraging turnaround in manufacturing.
- US Economic Data SurprisesUS manufacturing contracted (again) and non-farm payrolls came in well below expectations - warning signs?
- Election Year Anomolies:There has been a welcome relief in lack of load-shedding the past while, but strange this happens just before elections...just as does mass unrest in the US of A...
After one of its best-performing weeks for the year, the Rand opened on Monday in the mid-18.70s against the Dollar, and after a brief flurry higher in early trade...
...the local unit continued its March lower pushing below R18.70 and ending the day in after-hours trade testing 18.60 to the USD.
The Rand's strength could be somewhat attributed to the Japanese yen jumping sharply after it slid past 160 per dollar earlier in the session - levels last seen in 1990!
This led to market speculation that Tokyo's central bank may have intervened in the currency market while the country was on holiday...
...something the bank never admitted or denied.
So a good start to the week for the Rand, but it was not going to be a one way street, as the market bounced overnight and continued to rise throughout the SA trading session...
...amidst news that South Africa's trade surplus fell to R7.3bn in March 2024, compared with the revised R13.3bn in February, with imports surging 6.1% over a month.
The Rand hit around R18.84 per dollar in afternoon trade, before managing to pull it back to Monday's opening levels...
...a net zero after two days of much activity!
But all eyes were on the US for Wednesday with two key news events...
...ISM Manufacturing Purchasing Managers Index (PMI) and then later, the Fed's interest rate decision.
On Wednesday, the Rand pretty much followed in Monday's footsteps as it initially tested R18.80/$ before reversing sharply and continued to fall through the SA trading window...
...finding some initial support around 18.60 before managing to push in to the mid-18.50s in late US trade.
The market was already moving lower before ISM Manufacturing PMI release, but was likely given an extra boost with the results coming in well below expectations, with April showing a drop to 49.2 compared with 50.3 in March, an indication of a contraction once again in the US manufacturing sector...
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As can be seen above, March's reading of 50.3 was the first above 50 since October 2022!
However, the news later came in with no surprises, as the Federal Reserve kept the target range for the federal funds rate unchanged at 5.25%-5.50% for the sixth consecutive time...
... as it reiterated concerns in bringing inflation back down to its 2% target.
In other news:
- South Africa is experiencing a unique period of continuous electricity supply just before elections, which has sparked more scepticism than applause in a country that has grown accustomed to frequent power outages lasting for years.
How come everything seems to be mysteriously coming right at this critical point in the government's tenure? How come this wasn't happening last year?!
- In another election year phenomenon, there are mass protest springing up again in America, this time Pro-Palestine demonstrations on university campuses. Isn't it strange how there is always 'sudden' unrest that spreads throughout the States a few months before US elections...
...that is, until you realize that these are always organized (never spontaneous) - and those involved are often mere puppets being stirred up with an ulterior objective, and backed by organizations and persons who don't have America's (or humanity's) best interest at heart.
- SA - Manufacturing Production
- UK - Interest Rate Decision
Getting back to the Rand Thursday saw the Rand open in the mid-18.50s to the dollar in early trade, testing 18.50 around SA open, but then it seemed to run out of steam, as the market lost 20c over the next few hours...
...and this despite the news that the Absa Purchasing Managers’ Index surged to 54 in April 2024, up from 49.2 in the prior month, signalling a renewed expansion in South African factory activity - the strongest since March 2022 (see below).
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But just when it seemed that the Rand had given up, it managed to pull it back in after-hours trade, pushing lower to close out the day aroound R18.52/$, as the market held its breath ahead of the 'biggie' for the month - US Non-Farm Payrolls.
The Rand initially lost some ground in early trade, but seemed to find some strength as it pushed still lower against the dollar ahead of the news release...
...and by the time it was due, had managed to tested below R18.40/$ - its best levels since January!
And then the news came out, and it was a shocker, showing the US economy added just 175,000 jobs in April 2024, a sharp drop compared to the revised 315,000 jobs added in March and well below market expectations of 243,000...
...on the back of the poor Manufacturing PMI data, this reflects a significant slowdown in the economy.
And the unemployment rate also surprised, as it edged up to 3.9% from 3.8% in March.
So bad news for the US should mean Rand strength, right?
Wrong!
Instead the market immediately bounced, rising around 15c before managing to recover slightly and close out the week around R18.47/$.
But that should not take anything away from the local unit's stellar efforts, as it pulled out its second week of gains against the greenback.
The Week Ahead (6-10 May 2024)
This week does not have a lot happening in terms of economic events, per below:
But that does not mean that there won't be volatility....
...in fact our forecasting system is suggesting we could be in for some interesting moves...
...which could take a few by surprise!
Please don't be one of them!
to make the RIGHT decisions...and take the RIGHT action....at the RIGHT time!
Hit the link below to get access to our latest predictions.
Until we meet again, keep your wits about you!
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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(You don't want to regret not having done so this time next week...)
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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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