Welcome to our first review of South African Rand vs Dollar (USD/ZAR) for the month of February - can you believe January is over already?
And what a humdinger of a week it has been, with February's winds showing early signs of being rather Rand-contrary!
With plenty of news, events and tensions both locally and globally...
...it was always going to end up being a week the Rand was going to battle to navigate.
But it seemed to be doing just swell, as the locally currency managed to tack its way against the headwinds for most of the week ...
...but come Friday, it all unravelled very quickly!
Well, enough of the preamble, let's dive into the detail.
Key Moments (29 Jan - 2 Feb 2024)
Some highlights from the past week were the following:
- IMF Slashes Growth Forecasts: Alarm bells rang out from IMF's slashed growth forecast, signalling turbulent economic seas ahead.
- Government Labour Decisions: The week was market by government changing its BEE targets and agreeing to a minimum wage increase.
- Rates Decisions and US Payrolls: Two interest rate decisions from the US and the UK, plus Non-Farm Payrolls (the big mover of the month) all provided potential triggers...
The week's voyage embarked on Monday with the Rand sitting in the mid R18.70s against the Dollar after having put in a sterling performance the week prior.
And it seemed to be calm water sailing as the local currency meandered through the day in a relatively narrow range...
...it appeared the markets were also treading water as they awaited overseas central bank interest rate decisions in the US and UK...
...and of course the US job numbers on Friday.
But Tuesday started to get interesting, as the Rand started to hit some headwinds, with the IMF downgrading its economic-growth forecasts for South Africa to a meager 1% this year, warning that energy and logistic sector challenges were constraining activity and acting as a drag on the entire region.
The local currency initially lost some ground, as it tested just above R18.90/$ during the day...
...but then quickly recovered to regain its course - and by the end the day was back where it had started. And then on Wednesday, it seemed to gain some extra courage as it pushed below R18.70 to test R18.60 to the Dollar as the market anticipated the Fed's interest rate decision later that day...
...which came out as expected, with the Fed deciding to keep rates where they were, but also pushing back on any hopes of a rate cut.
The Rand reacted on the news as it whipsawed between R18.57 and R18.76 before settling down around R18.65 in late trade, as it awaited more winds to blow.
On the political front, the ANC government seemed to be flexing its muscles on the labour and employment front:
- Firstly, it continued to push its openly race-based (and communistic) BEE agenda by revising its employment equity targets; including a renewed focus on senior and top management levels and replacing specific targets for workers of different races.
- And then, as was announced later in the week, it increased the minimum South Africa hourly wage by 8.5% starting from next month.
Against the backdrop of the IMF's dismal outlook for growth, this is exactly what is not needed, making it ever more difficult for employers to navigate an already difficult economic landscape where the odds are firmly stacked against them...
...but hey, it is election year, and so all that matters is doing what needs to be done to get the votes, even if it puts businesses under in the long run!
In other news, on the global stage, the theatre of geopolitics continued to play out its dramas:
- Tensions escalated between the US and Iran after the US officially blamed Iran-backed group for the prior weekend's deadly attack on an American military base in Jordan, clearing the way for retaliation, which could have significant implications for the region.
- The Texas-Biden standoff took a new turn with 14 states sending National Guard troops to assist Texas and a truckers' convoy descended on the area to draw attention to the growing crisis and lend their support to the Lone Star State in its fight against the Biden administration over the border chaos.
Getting back to the Rand, Thursday dawned with the market in the mid R18.60s as it awaited Bank of England's interest rate decision, which was also came in unchanged, but indicated it was closer to a rate cut.
The Rand's performance seemed to mirror its antics on Wednesday...
...as it initially lost ground as it pushed above R18.75/$...
...but then reversed sharply to punch back down, testing Wednesday's lows of R18.57 before thrusting down to test R18.55 in after-hours trade. And then came Friday, and the biggie of the week and the month - US Non-Farm Payrolls...
...and it didn't disappoint as a major market trigger!
Against an anticipated 180,000 increase, US employment grew by 353,000 (almost double that), which gave the US dollar a boost...
...and the Rand literally fell out of bed, as it lost all of 35 cents during the day.
News that the US had carried out retaliatory strikes on Iranian-linked militia targets in Iraq and Syria also gave the Dollar a boost as investors sought safe haven currencies, which added to the Rands woes.
And with that, the local unit was left licking its wounds around the R18.90 levels...
...and wondering what the rest of February held in store!
And that was the wrap on another eventful week...
The Week Ahead (5-9 February 2024)
Sjoe, we are only into February, but things already seem to be speeding up!
The last two weeks have been action-packed in terms of economic data releases, and this coming week comes as a bit of a breather on the data side...
...but don't expect things to be any less volatile, with increasing geopolitical tensions globally...
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 said last week, flying blind can be costly in this market - you need to fly by instruments, not gut feel!
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!
Please 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. 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
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