Welcome back to our next Weekly Rand Review.
Once again, we bring into the cockpit with our 30,000 feet view of the South African Rand's journey, as it faced some severe headwinds and sharp reversal of fortunes against the US dollar...
...something we had anticipated, as you will see!
It was a week of two halves, as the Rand initially looked like it was going to continue its dominant performance, but then it all unravelled rather abruptly...
It was not a great week for Saffers from an economic point of view, or a great week for the ANC as the elections loom...
...while across the ocean some major events were happening that not only boosted the crypto industry, but could drastically shape banking and financial markets in general into the future.
Let's dive into the details and see how the Rand fared.
Key Moments (20-24 May 2024):
These were some of the major headlines over the last five days:
- SA CPI and Retail Sales Disappoint: Higher-than-expected inflation figures and lower-than-expected retail sales dampened sentiment.
- ANC Support Drops with Socialist Agendas: Latest polls show the ANC is losing further support despite the signing of the NHI Bill - and households relying on grants breaching 50%.
- US Bills Shake Markets: Bills which provide a framework for incorporation of cryptocurrencies in US markets and banned CBDCs passed the House, while the End the Fed Bill has also been tabled - interesting times!
- Dow Jones, Precious Metals and Bitcoin Shine: Precious metals had a record week, as did the Dow Jones, while Bitcoin bumped back above 70,000
- Middle East Tensions Intensify: The ICC have entered the Middle East fray amidst heightened tensions following Iranian president's death in a helicopter 'crash' on the weekend.
After a late surge at the backend of the previous week, the Rand opened the innings around R18.15 to the Dollar, but soon lost ground during the SA session, as the market pushed higher to test close to R18.30/$...
...but the local unit fought back bravely to push it back down to end the back where it had started.
But the Rand's performance was nothing compared with US stock and precious metals..
...as the Dow Jones and Gold both hit all-time highs of $40,077 and $2450 respectively...
...while Silver breached $30 to record its best levels in 11 years!
And cryptocurrencies weren't too far behind, as Bitcoin managed to push back above 70,000...
...gaining an impressive 27% since its low at the beginning of the month!
Which, of interest, is some we had been predicting for Gold and Bitcoin!
Tuesday saw the local unit lose ground as the market pushed higher to test above R18.20 before the Rand again managed to pull out some counter-punches to drive the market down to hit a new 9-month best of R18.02 to the Dollar!
But that was the end of a fabulous run for the Rand, which had been one of the best-performing emerging market currencies this year up to that point.
And this was something were were anticipating after its good run of fortune with our outlook for the next few days which we had published late on Friday the week prior (see below).
(Click to enlarge)
As can be seen from the above, we were expecting the market to bottom out above R17.98 to the USD before rising above 18.47...
And what happened?
On Wednesday the Rand attempted to retest the previous day's low of R18.03/$, but then reversed strongly, ending several weeks of steady appreciation against the Dollar, Euro and Pound...
...just as forecast - who could have known? 🙂
This came amid news that SA CPI data release showed a higher-than-expected increase of 6.2%, suggesting rising inflationary pressures within the economy, putting a damper on any potential future rate hikes by the South African Reserve Bank.
The middle of the week also saw one of the interesting developments in the US, with the House of Representatives approving the Financial Innovation and Technology for the 21st Century Act (FIT21). This legislative move which will provide a framework and structure for incorporation and regulation of the crypto industry, was seen as a positive step for the industry, and will likely fuel further gains in Bitcoin and other cryptocurrencies...
...this now goes to the Senate for their consideration and vote.
In other news:
- The Social Research Tracking Poll shows the ANC losing ground to the DA and MK since the very public signing of the National Health Insurance Bill, with them now showing at 40% versus the DA's 27% and MK's 13% – certainly not the result they had hoped for! Also, this is despite a SA Stats General Household survey showed that 50% of South African households benefit from social grants, rising from 39.4% at the same time last year...
...something the ANC is very proud of – as only a socialist/communist would be! How about creating an economy where people can find jobs instead?
- Things in the Middle East aren't cooling down it seems, with Iranian president have been killed in a helicopter crash in what seems rather dubious circumstances, with Iranians suspecting US/Israeli involvement.
And the International Court of Justice (ICJ) stepped into the fray last week, ordering a halt to Israel's military assault on the city of Rafah. This comes hot on the heels of the International Criminal Court (ICC) seeking warrants of arrest for Israeli Prime Minister Netanyahu and Hamas Leaders for war crimes.
Things just seem to be hotting up in this area...
Getting back to the Rand...
Thursday dawned with the local currency on the back foot, opening in early trade around R18.25 to the USD, and immediately losing ground, breaking above 18.30 resistance and catapulting higher to almost touch R18.50/$ before pulling back a few cents in late after-hours trade.
This comes despite stocks being at 15-month highs and South African bonds receiving more cash in April than they have since 2019, as investors bet on an ANC/IFP collaboration after the elections, which could result in more market-friendly policies...
...yeah sure...don’t hold your breath!
All this should have been good news for the Rand, but we have learnt by now, haven't we, that that is not how the markets work!
Across in the US, Congress put a nail in the coffin for central banks' drive towards a central bank digital currency (CBSC), as it passed a bill banning the Federal Reserve from issuing a CBDC, which is welcome news for the crypto market as well as for the man on the street.
This comes amid a global drive by governments towards a cashless society, which would be ominous in the extreme, especially if it was linked to a China-style social credit score...
...criticise the government or put a foot wrong and your bank account is frozen - and you have no cash to buy anything...
...hmm, sounds rather like the ultimate in Communist control, doesn't it?
This comes off the back of the "End the Fed" bill introduced the prior week, which seeks to abolish the Board of Governors of the Federal Reserve and the Federal Reserve banks...
...blaming the Fed policies and its monetizing of debt (creating trillions out of thin air) for the devaluing of the US dollar and the high inflation being experienced.
We have always foreseen that the central bank and fiat money system would come to an end...and an ultimate return to some decentralized currency system backed by gold and other hard assets...i.e real money!
Some interesting developments indeed.
Getting back to the Rand, it finally managed to pull it back on Friday, but not before it had tested higher against the Dollar, hitting R18.50 level before the local unit managed to find some strength...
... pushing back down to hit support around R18.37 and then bouncing around to close the week out around R18.40 to the Dollar.
But the week for good crypto news wasn't over yet, with the surprise news that the Securities and Exchange Commission (SEC) had given approval for US stock exchanges to begin listing Ether ETFs, following on their approval of a spot Bitcoin ETFs in early 2024.
Phew, what an action-packed week of market highs and both political and financial market shake-ups shakes that could shape things globally in the coming months.
To keep abreast of the Rand's gyrations, view our live rates chart.
The Week Ahead (27-31 May 2024)
Well, we are finally here, with all eyes being on the elections - and probably one that the ANC are the least positive about with their waning support...
...but you can be sure they will not be wanting to let go on any power!
Apart from this, here are some potential market triggers over the next five days:
- SA: Trade Balance
- US: Consumer Confidence, GDP Growth
- Euro Area: Consumer Confidence
- UK: House Price Index
Fair to say, we cannot expect to have such an important news filled week as last, but it is a most important one, with the elections affecting what happens in the country for the next five years...
...something that will impact on the economy - and the Rand - going forward!
We are expecting a bumpy ride if our forecasting crystal ball is anything to go by!
Hold on tight...
...and don't try fly without having your eye on some dependable instruments (whether ours or others) to give you direction!
to make the RIGHT decisions...and take the RIGHT action....at the RIGHT time!
Hit the link below to get access to our latest outlook
for the next few days, weeks and months ahead.
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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