Welcome to another issue of our Weekly Rand Review.

Things seem to be heating up on the financial market front, as stock markets came sharply off their recent peaks, and central banks are starting to take the pressure off on interest rates.

The Rand did well to pull things back nicely after a bad start (and in so doing validating our short-term prediction) but things turned a bit sour once stock markets got hit in the latter half of the week, sending jitters through the market.

Let's jump in with some of the details.

Key Moments (29 Jul - 2 Aug 2024):

In some major headlines over the last five days:

• SA Trade Surplus: Some positive news, as a surplus pushed to levels not seen since last year
• BoE Jumps Gun on Fed Rate Cut: Bank of England pips the Federal Reserve as it makes its first rate cut, while Powell hinted one was near
• US Jobs Disappoint: Non-farm Payrolls and Unemployment both came in worse than expected, hinting a slowing down in the economy
• Stock Markets Tumble: Global stock markets fell dramatically after recent highs - is this the beginning of the end?

The market opened on Monday with a big week ahead in terms of economic releases and rate decisions, which meant a lot of volatility was on the cards.

The Rand had put on a fine performance at the end of the previous week, as it managed to pull things back from R18.53 to around R18.25 to the Dollar on Friday, which is where the week opened.

Of interest, our Friday updated outlook, based on our Elliottwave and composite sentiment cycles analysis was showing that the market was likely to head lower into the 18.19-18.02 area in the coming days, with a likely bottoming out in this area. A break above R18.53/$ would invalidate this outlook (see below)

(Enlarge here)

It was going to be interesting to see how this all played out!

And our prediction was immediately tested - to the wire!

Upon opening in early trade, the market initially pushed a couple of cents lower, but then took off during the SA trading session, catapulting higher to within a cent of our R18.53 invalidation level...

...before the Rand finally managed to find some fight, pushing the market back down to close the day around R18.40 per US$.

Tuesday started with the Rand on the retreat as the market initially tested R18.47/$, but then the Rand turned things around nicely, as the market thrust down lower through the day to close out below R18.30.

It seems the market was indecisive as it awaited interest rate announcements and bigger news releases in the week, but the Rand seemed to be holding its own.

Come Wednesday, and another win was penned for the Rand, with the market pushing up a few cents before the local unit turned things around again, pushing the market to new weekly lows to close out the day in US trade around R18.16/$...

...and in so doing, into our target 18.19-18.02 target area!

Of course, Wednesday was the Fed's interest rate decision day, and despite some calls from economists and politicians to implement a cut, they decided to keep its key interest rate unchanged at a 23-year high of 5.3%.

But Powell did give some hints that if inflation continued to fall, “a reduction in our policy rate could be on the table” when the Fed next meets in mid-September.

Looking at the 3-Month Treasury Bill Yield against the Fed Funds rate, you can see that the T-bill rate is a clear leading indicator for these decisions...

...in other words, the markets set the rates, not the US Federal Reserve!

As you can see, the T-Bill rate (blue line) seems to have topped, but not yet sufficiently for a rate cut, it seems!

Some encouraging local data release was that South Africa managed to notch up a trade surplus of R24.2 billion in June 2024, up from the previous month - and the largest trade surplus since May 2022.

It also came with US GDP Growth for Q2 at 2.1%, slightly below expectations, and showing moderate expansion...

In other news:

Global stock took a tumble across the board after achieving record highs in recent weeks...

...in just 2 days:

• The Nikkei Index lost 7.5%
• The S&P 500 lost 4.83%
• The Dow Jones Industrial Index lost 4.65%
• The Nasdaq lost 6.53%
• The SA Top 40 lost 3.19% (after making a record high).

Some interesting times ahead on these stock markets...

...we have warned for some time that a major crash is coming of the likes we have not seen since 1929, possibly worse.

Is this the start, or do we have a final fling higher before the BIG ONE?

To get back to the Rand,

Thursday was real whipsaw day, as the Rand opened around R18.16/$ and lost ground into mid-morning before bouncing back to punch lower to a new weekly low just a tad above R18.10/$, as the market awaited the BoE's interest rate decision.

The Bank of England announced its first rate in over 4 years, taking key rates to 5% from the 5.25% that has been in effect since August last year.

The Rand initially gained against the Pound and Dollar, but then reversed as the Rand slid to hit R18.30/$ before retracing a bit to end the day around R18.23 per USD.

This came with was some Rand-negative news though, with Absa Manufacturing PMI dropping to 48.3 in July, down from 50.7 in June, indicating a contraction in the manufacturing sector.

Friday was another tug of war as the market initially retested the lower R18.30s before the Rand punched lower to retest the week's low ahead of US non-farm payroll data being released...

...which when announced, showed an addition of just 114,000 jobs in July 2024, well below the 175,000 expectations...

...with an increase in unemployment from 4.1% to 4.3% - its highest since October 2021.
The market always seems to react over US non-farm payrolls economic release - and this was no exception...

...the Dollar took a pounding, but so did the Rand, as it was pushed all the way back up to hit R18.33 before running out the week in the mid R18.20s...
...in the end, losing the impressive gains it had made.

Once again, a week with opportunities for traders both sides of the market - but also potential for missing out if you pulled the trigger at the wrong time

The Week Ahead (5 - 9 August 2024)

Monday dawned with the markets in jitters after Tokyo stock markets tumbled further after Friday's rout, with further downside expected in global stock indices. The crypto market also took a beating over the weekend.

There aren't any major data releases in terms of triggers this week, with the following some of the main ones on the calendar.

• SA: S&P Global PMI, Manufacturing Production
• US: ISM Services PMI
• EU: GPPI, Retail Sales

But thing are certainly hotting up - we will need to keep out wits about us as volatility hits levels we haven't see for some time!

We trust we can continue to provide valuable insights as we keep you informed...

Are You Making Informed Decisions?

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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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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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