A merry welcome to April's last Weekly Rand Review...
...and just like that, we are basically a third of the way through the year - and just a month away from elections, with things hotting up as can be expected!
With plenty happening both domestically and abroad (with jitters in terms of US growth and banking sector tremors)...
...the Rand finally managed to put in a stellar performance, clawing back some much-needed lost ground after a dismal April performance - and giving local importers, consumers and investors something to smile about.
Let's see how it all panned out.
Key Moments (22-16 April 2024):
Some news highlights from the past week that caught our attention:
- SA PPI Increases Slightly :Domestic inflation ticked up from the prior month, keeping rate cuts at bay.
- US GDP Cools Sharply:US growth drops to less than half of previous quarter.
- US Banking Sector Takes Double Knock:The US banking sector had a failure at home and got caught up in the war abroad
The Rand opened the week around the R19.10 level against the greenback, the first week since the beginning of March where the local unit has opened above the psychological R19/$ level.
The local unit had managed to end the prior week with a decent pullback on the Friday, but if anyone was hoping for more of the same on Monday, they were sorely disappointed...
...as the local unit almost immediately lost ground...
...and continued to do so through the day, as the market pushed higher to test R19.20/$ a couple of time before taking a breather.
And then, after retesting the R19.20 level again in early trade in Tuesday, it managed to break through this level during the SA trading window, flirting with R19.27/$...
...before managing to pull things back sharply to end the day around R19.10 to the Dollar.
Some positive news for the days was that South Africa's composite leading business cycle indicator rose by 1.7% month-on-month in February 2024, from a downwardly revised 0.2% decrease in the previous month...
...and the first improvement in three months!
Wednesday dawned with the Rand treading water around the R19.10 levels as the market waited for its next trigger, which duly came with the release of US Durable Goods Orders - and it came in above expectations...
...as new orders for manufactured durable goods surged by 2.6% month-on-month in March 2024, compared with February's revised 0.7% and marking the largest advance since November.
On the surface, this looked like a positive sign for the US economy...
...but how much of this is just bought on credit? (i.e. no REAL growth)
But besides that, this also was a signal that any interest rate reduction was not going to be on the cards soon...
...which was the trigger the market needed for a move!
The US dollar reacted...
...and so did the Rand, as the market immediately jumped higher by 15c over the next few hours to test the prior day's high, before the Rand managed to claw back a few cents in after hours trade.
In other news:
Firstly, with JP Morgan being caught in the middle of the US-Russia sanctions war as a Russian court ordered the seizure of funds held in JP Morgan's bank accounts held in Russia, as a result of a lawsuit brought by Russian VTB Bank seeking to regain funds of it that were blocked abroad by US authorities after the Russia/Ukraine conflict began.
And then, later in the week, we had the first real US banking crisis casualty in 2024, with US regulators seizing Republic First Bancorp...
...costing the FDIC deposit insurance fund a cool $667 million in the process.
This is the first significant failure since last year's failure of Silicon Valley Bank, Signature Bank and First Republic Bank...
...but it will certainly not be the last for 2024!
Watch this space!
To get back to the Rand, Thursday dawned with all eyes being on the release of SA's PPI inflation figures...
...and even more so, the latest GDP growth rate in the US.
But before any of these hit, the Rand was on the move, as it powered its way down to test that key R19 level (again)...
...and hardly reacted to the to the PPI release, which showed that the producer price index had an annual increase of 4.6% in March, following a 4.5% rise in February...
...but briefly reacted to the news from across the ocean a bit later, spiking higher before regaining most ground lost.
But the GDP news itself took the market by surprise:-
It showed that the US economy had cooled dramatically the past quarter, with an annualized growth of just 1.6% in Q1 2024...
...compared to 3.4% in the previous quarter and well below forecasts of 2.5%...
...and the lowest growth since the contractions in the first half of 2022!
But what makes this worse is a debt situation which is spiralling out of control...
...with Federal Debt now sitting at 34 TRILLION DOLLARS...
...with a whopping 46% increase since Q1 2020 (see below)!
The US debt situation is WAY WORSE than it was in 1929 before the Great Depression in terms of GDP per capita...
...and is a bubble that is ready to burst at any time!
But it seems the present government has no intention of addressing the problem...
...but instead is exacerbating it, with US Congress last week sending another few tens of billions of US dollars overseas (money that they do not have!)...
...while an open border crisis continues to escalate without a single cent allocated to fixing the problem...
Lots that does not make sense here...
Getting back to the Rand...
Friday saw the local unit record one of its best days for many months, opening just above R19$, briefly weakening towards R19.10 soon after SA trading opened.
...but then powered sharply lower, gaining over 20c in just an hour.
It then continued to push still lower to hit R18.72 before finally taking the foot off the gas to close out the day and week in the mid-R18.70s.
A pretty impressive performance all-in-all!
The Week Ahead (29 April - 3 May 2024)
This week is a big week in terms of potential triggers, with some of the main ones being:
- SA - Trade Balance, Manaufacturing PMI
- US - Interest Rate Decision, Non Farm Payrolls, Unemployment
- EU - GDP, Inflation
So some potential for some big moves, but which way?
We will keep out of the guessing games, and instead will continue to use our forecasting system to keep us ahead of the moves...and the news...
...and we recommend you do the same!
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...)
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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