Welcome to another issue of our Weekly Rand Review as the local currency once again had another rollercoaster week - blowing cold, then hot, then cold again...
...which seems to be par for the course these days in this fragile and volatile world.
In a week coloured by interest rate decisions, the Rand started off miserably...
...before coming back with a bang...
...but then failed to hold on (once again) - as it lost it all, plus some!
One thing with such moves, is that it provides plenty of opportunities for both exporters and importers to take advantage of better rates...
...but of course, you needed to have some idea was to what was going to happen!
Fortunately, if you were privy to our forecasts, you would have had an inkling (as we will show).
Let's dive in and discover how things panned out...
Key Moments (18-22 March 2024):
Some news highlights from the past week that caught our attention:
- Retail Sales & Inflation Disappoint: Retail sales in SA fell in January, while inflation ticked up some more...
- Banks Mark Time on Interest Rates: Interest rate decisions in the UK and US resulted in rates being held again, but it was the talk about future rate cuts that mattered.
- Mixed Signals in US/SA Relations: While US Treasury sounded bullish on South Africa's economy, Congress pushed forward on their relations review.
OK, let's get into it then.
The week opened on Monday with the Rand around R18.75 to the US$, firmly on the backfoot after having had a dismal end to the prior week (after an encouraging first half)...
The question of course was - where to now?
Well, of interest, our Rand forecasting system's short-term prediction on the Friday prior (see below) gave us a more than healthy hint as to where it expected the market to head...
(click to enlarge)
As can be seen, with the market sitting at 18.76, it showed a 75% probability of a move into the 18.90-19.05 area - as long as we kept above 18.55...
Bottomline: if this played out, we were in for some more Rand weakness
So we were expecting a bit of fireworks...
...and it didn't take long for them to show up, with the Rand (USD/ZAR) jumping weaker around SA market opening - and then catapulting higher to test the R19 in after-hours trade...
...and in so doing, validating our forecast of Friday (that didn't take long, did it?)
Come Tuesday, and the Dollar tried to push the Rand above R19/$, but the local unit bounced back in impressive fashion to push the USD back down to R18.90 by the end of the day...
...it seemed to be a real tug-of-war, as traders jostled to position themselves ahead of upcoming economic data releases and interest rate decisions.
And then Wednesday dawned, with the Rand losing ground initially - that is, until local inflation data hit, which showed South Africa’s annual inflation rate rose to 5.6% in February 2024, up from 5.3% in January, and while in the bank's 3–6% target range, a bit further from their preferred 4.5%...
...and a move in the wrong direction to keep hopes of an early rate cut alive.
And shortly thereafter, there was more bad news, as data showed that SA Retail Sales fell 2.1% in January compared to the prior year, following an upwardly revised 3.2% increase in December...
...this being now the tenth decline in the last 12 months, reflecting a slowing down of consumer spending as higher interest rates and inflation take their toll.
This 'bad news' (depending on which side of the fence you are of course) seemed to be all that was needed for the Rand to pick up some strength and it punched lower to test R18.80 as the market waited the Fed's interest rate announcement...
...which as expected, was to do nothing (for the fifth consecutive meeting), but stated they still planned to cut interest rates three times in 2024 (as forecast in December).
The market initially took the news negatively, as the DXY plunged lower, with the Rand willingly pulled into its slipstream to end the day around R18.65/$...
...a full 30c gain in the day!
And with the Rand sitting close to key levels, it was time for our next update...
(Click to enlarge)
This showed an interesting situation, as it looked like the Rand was on a one-way track stronget...BUT our forecasts showed that there was 60% probability of a reversal around these levels...
...and a move back above R18.89 and higher...
And then, in other news:
- It was a week of contrast in US/SA relations, as the week began with US Treasury's Adeyemo saying he was bullish on South Africa and their relationship, despite the differences and strained relationship...
...but across in Washington, it was another story, as the “U.S.- South Africa Bilateral Relations Review Bill” that would require the US government to comprehensively review US relations with South Africa crossed its first legislative hurdle on Wednesday, passing the House of Representatives Foreign Affairs Committee.
This one needs some watching...
Thursday dawned with Saffers having the day off - and perhaps some thought the Rand could also afford to take the day off, sitting pretty in the mid-R18.60s...
...but my, how quickly things change!
The global market seemed to shrug off any US dollar negativity from the day before, as the greenback rose across the board, and the Rand lost ground quickly, with the USD/ZAR rising 20c before retracing somewhat...
...and in the mix, we had the Bank of England also marking time on any rate cuts, as they awaited more positive data in terms of inflation before doing so.
And then, in no time, it was Friday!
But it wasn't going to be a good Friday for the Rand, which seemed to have decided to leave the ring and take a long weekend off...
...opening in early trade around R18.80, in no time the market spiked higher as the Rand lost ground quickly, testing R19.05 to the US$ before it somehow managing to come off the beach to try and end the week below the psychological R19/$ mark...
...which it only just managed!
A rather torrid week all-in-all for the Rand..
The Week Ahead (25-29 March 2024)
Monday dawned with news of a deadly mass shooting terrorist attack in Moscow late on Friday, which is likely to have some repercussions amidst escalating tensions surrounding the Russia/Ukraine conflict.
Apart from that, with another short week as we finish of Q1 (already?!), we will be keeping our eyes on a few fundamental events:
- US - GDP Growth
- SA - Interest Rate Decision, PPI
And if you are looking for some direction, our forecasting system is giving us some important pointers for the weeks and months ahead...
...helping us and our clients to keep one step ahead of the market.
As we showed in the past week's move -
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, safe trading!
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.
No charge. No card. All yours to trial for 14 days.
(You don't want to regret not having done so this time next week...)
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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