Another radical week for the Rand against the Dollar as it defied expectations, bucked the trend and much more, leaving many void of words to explain how it was all playing out.
It was to races for the ZAR, as it broke well into it's best run this whole year, moving toward levels last seen in October last year.
All this amidsts global turmoil...
...and a strengthening Dollar!
This 'unhinging' from the Dollar as a whole (the Dollar Index has in fact been strengthening the last few weeks), is a very rare occurrence that we do not often see from emerging markets.
Most of the time, they are dictated by the big players...
...but not so this time!
Let's get into the full review to get some perspective!
Here were the biggest talking points of the week:
- Interest Rate Hike - big news from local shores with the Reserve Bank making a call on rates...
- Ukraine War Drags On - hitting the one month mark of a war which feels like it has already been years, and still no conclusive path to peace in place, means the unstable global markets continued...
- US Housing Market - soaring inflation has been the latest news, but for the last 2 years, house prices have just soared...how long will it last?
So to start with the local unit, we saw the market open around R14.95, just below the phycological level of R15/$...
The week was a shorter one, with the public holiday making a quiet start to the 5 days of trade.
But there were no holidays in Ukraine though, as the war raged on, with Russia focusing their attentions on Mariupol, the coastal area of Ukraine (stronghold of the neo-Nazi Azos battalion).
We have now hit the one month mark since Russia began their 'special military operation', and while Putin's spokesperson has maintained it is going according to plan, it would seem from reports that the going was slow.
The uncertainty of the whole situation remains - especially amidst all the ongoing propaganda and claims from all quarters.
On Friday, Biden told Polish president that the stakes of Ukraine go well beyond its borders...
...and Edrogan, Turkish President, said that Ukraine and Russia are nearing "consensus" on 4 of the 6 key issues to ending the war.
And then came news from Russian Defense Ministry saying that the first phase of its operation was mostly complete and it would now focus on the eastern Donbass region, a pro-Russia separatist region.
Frankly, it remains difficult to believe anything that is reported - and we know by now to not put too much store on supposed ceasefire, agreements etc, until they are actually in place and effective.
But as for the local unit, it just brushed all of it aside and just pushed on stronger:
This was not all foreign focus though, as plenty action transpired at home too.
- The whole week built up to the SARB Interest Rate decision that was due to happen on Thursday, and despite the expectation being for the 25bps hike, there was a lot of debate as to whether there would be a larger one. But come Thursday, as per the expectation, the hike was 25bps, and even though the decision was what everybody expected, the rand rallied in response.
- Perhaps this also had to do with the fact that the Monetary Policy Committee revealed that two of its five members wanted an even bigger increase, due to inflation fears. Should inflation worsen, we might expect hikes of 50 basis points later in the year.
- Further easing of lockdown level 1 means Saffers are no longer required to wear masks outdoors. The state of disaster is still in force, but Ramaphosa indicated that draft regulations, that will allow the government to manage similar disasters, is open for public comment. This should mean that at long last, the state of emergency will end on the next deadline. It's about time - this medical tyranny needs to come to an end.
- In a turn of fortune, Ramaphosa actually had some good news to report this week, as SA reached the R1 trillion investment mark. Government’s fourth investment conference on Thursday heard pledges of investment from companies of R332 billion, which will take President Cyril Ramaphosa 95% of the way towards his R1.2-trillion investment goal. Four years ago, at the inaugural conference, an annual event that he has placed at the centre of his presidency, Ramaphosa said he wanted to attract R1.2 trillion in new investment in five years. Together with pledges made (and kept) over the past three years, investment pledges now stand at R1.14 trillion.
And then with a more global outlook:
-
Everyone is making plans that are tentative, from individuals to governments and business as everyone is of the same view that "of course, all this depends largely on oil prices and the war in Ukraine."
The effect of rising fuel prices has had a huge effect on inflation already, with ever increasing food prices causing grief for consumers. With no end in sight for the war, with NATO confirming it will send more reinforcements to Europe’s eastern flank, and Putin refusing to back down, the likelihood of oil prices remaining elevated seems high.
- Over in the US, pending home sales took a tumble with the latest February figures, falling 4.1% compared with January. This is the fourth straight month of declines in pending sales. This is undoubtedly a warning that the golden period of house prices in the US may just be over...and what is to follow next may well not be too pretty.
But getting back to the local unit, Friday's action saw it continue to press stronger against the Dollar, testing those R14.50 levels, capping off a stellar week.
It is crazy to think of the local unit performing like this when volatile markets are normally it's worst enemy, but somehow it seems to be managing the uncertainty, and in fact thriving in it...
...so we head into another week with baited breath...will this trend last?
The Week Ahead (28 March - 1 April 2022) |
As we are about to complete Q1 of 2022, who would have thought this is where we would be when the year began!
While these may continue to play second fiddle to geopolitical tensions, there are some triggers in the days ahead with events worth watching:
- US - Jobless Claims, Unemployment Rate, Non Farm Payrolls
- SA - Unemployment Rate Q4, Balance of Trade
- EU - Inflation Rate
Once again, Russia/Ukraine conflict and global implications will continue to be in the headlines, as the markets wait to see where all this is heading.
As for the Rand, it has continued its good run, but how much longer can this continue?
The next few days are again likely to be interesting...
Please take our Rand forecasting service for a test-drive!
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To your success~
James Paynter
