With key data releases scheduled for early in the week, investors were expecting major market movement as they continue to try and make sense of the conundrum that is the global economy…

...and that's exactly what we got.

Last week threw up a little bit of everything.

However, each piece of new information unravelled a number of questionable underlying factors that continues to wane on hopes of markets stabilizing anytime soon.

As a result, emerging currencies like the Rand - which largely take their cue from global drivers - are struggling to gain any sort of traction as the greenback remains to be viewed as a safe haven in this volatile market.

We've got a lot of local and international news to cover; let's dive straight in.

Key Moments (12-16 Sep 2022)

But first, let's see what what our forecasts were telling us on Friday, 9 September...

...as an be seen, our analysis showed that the market had either topped out at 17.54, or a last thrust in the 17.19-17.78 could be expected, with 17.0547 being the initial level to watch below.

(Click to enlarge)

It was going to be another interesting week...

These were some of the week's attention-grabbing headlines and major market movers:

• Rand Rollercoaster - - Strong headline retail sales figures were not enough to save the local unit from receiving a beating this week as a plethora of local and international issues weigh on the likelihood of short-term progress.
• Lights Out (again) - - After a few weeks of sporadic blackouts across the country, Eskom is back at it, officially implementing stage 4 load-shedding until further notice. Is this S.A.'s longest-running joke?
• U.S. Inflation - - The U.S. reported a slowdown in CPI to 8.3%; however, core inflation figures dashed any lingering hopes of a subsequent slowdown in the U.S. Feds campaign of increasing rates. A full basis point increase brewing?
• GBP 37-Year Low Recorded - - Despite U.K. inflation slowing in August on the back of a fall in fuel prices, retail sales fell sharply as the rise in the cost of living continues to hit households and brings fresh concerns over the state of the economy.

To jump right in, the local unit opened the week relatively flat from its previous close, trading at R17.28/$ on Monday morning.

Most emerging markets made up ground on the US dollar through the rest of the day as investors eagerly awaited the U.S. inflation report on Tuesday…

...which they were hoping would provide some definitive direction on the ongoing debate whether we've seen the peak of inflation in the world's leading economy.

Spoiler alert - it didn't!

If anything, the results sparked even more uncertainty.

U.S. headline CPI slowed marginally in August, albeit still remaining stubbornly high, to 8.3% year-on-year, but rose 0.1% on a monthly basis. Economists were also left humbled as their Core CPI expectation was no less than doubled, increasing to 6.3% in August…

...this no doubt underlines the caution that investors need to practice when using the news to shape their investment strategies. Over the same period, US PPI fell by 0.1%, while the core PPI rose by 0.2%.

What is particularly interesting is that while oil prices - the key driver of inflation – have been dropping steadily for a while (down to mid $80s), core inflation continues to run red hot.

What happens if oil prices reverse?

Now that's something to ponder…

Back locally, as we've come to know all too well, with U.S. inflation results, comes major market movement. And this time was no different, as the gains made by the local unit over Monday evening were erased in the blink of an eye.

The solitary piece of good news locally came in the shape of retail sales figures, which increased to 8.6% in July...

...however, that didn't paint the full picture.

The main contributor to the improvement were food and beverages, which increased by a massive 28%!

One may argue that the headline increase in retail sales is actually attributable to consumers being forced to pay significantly higher prices rather than purchasing more.

And can we mention higher prices without mentioning Eskom?

S.A.'s battling power utility was at it again on Tuesday, submitting a brand new application to NERSA requesting approval of a new 32% tariff increase a day before announcing stage 4 load-shedding to be implemented across the country.

Talk about rubbing salt to the wound!

Eskom last tabled a proposal for a 20.5% tariff increase which NERSA eventually watered down to 9.6% earlier in the year…

...since then, Eskom has also requested approval to levy an R928 tariff on solar power.

As inflation continues to rise and unemployment in abundance (the twin evils of macroeconomics), are these the signs of stagflation?

We'll let you make up your mind on that one.

After Tuesday's sharp reversal, the Rand continued to bleed for the rest of the week as expectations mounted more aggressively than ever toward another bumper rate hike by the U.S. Fed next week.

And then in other news:

• Eurozone CPI was recorded at 9.1% YoY in August, up from July's 8.9% reading. CPI core was also up at 4.3% from the prior month's 4.0% YoY. The lowest annual rates were registered in France (6.6%), Malta (7.0%), and Finland (7.9%), while highest annual rates were recorded in Estonia (25.2%), Latvia (21.4%), and Lithuania (21.1%).
• Russian President Vladimir Putin and Chinese leader Xi Jinping met for the first time in person since the start of the conflict in Ukraine. Reports indicate that the two authoritarian countries have drawn closer in recent years as part of what they call a "no-limits" relationship with the goal of creating a counterweight to the global dominance of the United States.
• The Gold price broke below key $1677 support to hit levels last seen 2½ years ago. This took many by surprise, with gold expected to be a safe-haven in a time of financial stress and uncertainty. But for us it simply validated our preferred outlook of the two possible scenarios that were playing out (you can access our global forecasts here).
• On the crypto front, the number one market contender Ether, has steadily been chipping away and gaining market share ahead of its all-important software upgrade later in the month, which will reduce the energy usage of Ethereum's blockchain. Bitcoin's market value has already dropped to 39.1% from 47.5% in June, while Ether has increased its share to 20.5% from 16% over the same period.

As we entered Friday, the final major headlines of the week came from the U.K’s inflation results which slowed in August mainly due to a fall in fuel prices…

…however, retail sales marked a 5.4% YoY contraction versus the 4.2% expected, prompting fresh concerns over the state of the economy.

An already battered Pound Sterling took this badly, falling more than a percent against the dollar to drop below $1.14/£ on Friday, its weakest level since 1985.

As the Brits prepare for a recession, its clear that the economic storm clouds are gathering at pace globally.

The BOE is set to announce its latest monetary policy decision next Thursday after a delay due to the death of Queen Elizabeth II, with a sharp 75 basis point on the cards as it hopes to drag down inflation.

Next week is going to be telling!

As for the Rand, having breached R17.50/$ in early trade on Thursday, the bleeding continued into Friday as the local unit hit R17.71/$ before coming back in after hours trade to end the week below R17.60/$.

The Week Ahead (19-23 Sep 2022)

A shorter trading week locally, but there’s no shortage of big events:

• SA - Inflation Rate YoY (May)
• EU/UK - BoE Interest Rate Decision
• US - Fed Interest Rate Decision

All focus for next week will firmly be set on Jerome Powell as he sheds light on the U.S. Fed's ongoing monetary policy decision…

...which has proven time and again to be a turbulent time for investors. This time should be no different.

Until then... tread softly.

Expect fireworks.
There's a lot more to come!

To give you a little helping hand, feel free to take our Rand forecasting service for a test-drive if you have not already!

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.

No charge. No card. All yours to trial for 14 days.

Please 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. No charge. No card. All yours to trial for 14 days.

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

To your success~

James Paynter