Welcome to the second last issue of this year's Weekly Rand Reviews!
This past week saw the Rand navigating a mix of local and international drivers. With softer inflation numbers at home, steadying global markets, and the ECB signaling its monetary stance, the Rand found support. However, geopolitical uncertainty and hawkish undertones from the Federal Reserve kept the greenback strong.
Overall, it was another week of gains for the Rand, but it could have been better had the local currency managed to hold onto its gains after reaching its strongest levels in a month.
Sit back and let us delve into some of the details...
Market Pulse 📊
- Price Action: R17.62-18.05 range reflects increased global volatility
- Technical Setup: Support found at R17.62/$, with resistance now at R18.05/$.
- Momentum: Early optimism on local data gave way to global risk-off sentiment
- Risk Events: S.A. inflation, U.S. PPI and ECB decision fueled the week
- Outlook: Local fundamentals and global uncertainties continue to set the tone
Key Moments (9-13 Dec 2024):
Some of the more critical factors affecting price action this week:
- Mixed Economic Signals: SA's Business Confidence Index surged to 118.1 in November, Manufacturing improved but Mining continued to decline.
- SA Inflation Falls: November’s annual inflation rate dropped to 2.9%, down from October’s 3.0%, well below the central bank’s target range.
- U.S. Inflation Tick Up: PPI increased by 0.4% in November, while the Inflation rate upped to 2.7% year-on-year
- ECB Maintains Rates: The European Central Bank cuts rates, and signals it may continue doing so
Monday: A Strong Start 🔥
Opening the week at R17.98/$, the Rand initially tested higher in early trade to hit R18.05/$ which ultimately was going to be the high of the week, as the Rand took the initiative to break below the previous week's low of R17.95 - before the lunch bell had rung...
...and from there it was pretty much one-way traffic, as the Rand continued to strengthen after SA close out the trading day at R17.82/$...
...an impressive start for the week, especially on a day when there was no real market movers!
Who said that news moves the markets?
Tuesday: Choppy Waters 🌊
Tuesday saw the Rand losing ground out the gate as it got dragged all the way up to test R17.90/$ with a flurry of local economic data on the cards.
On the positive side, South Africa's Business Confidence Index jumped to 118.1 in November, marking its highest level in nearly two years! Coupled with that was a turnaround in manufacturing production, which rose by 0.8% year-on-year in October.
But this was mixed with some poor mining results, with gold production declining by 3.4% year-on-year - its 12th consecutive decline!
But the Rand shrugged off any of the potential bad news, and turned things around after lunch to push back to R17.80 by the close
Wednesday: Rand Rollicks On📉
Opening at R17.80, the market was soon under pressure again, as the Rand re-tested the R17.90 level in morning trade with global tensions seeming to take hold on the markets early.
Saffers however were given a nice boost of confidence with news that the Inflation Rate was at 2.9% - below SARB's target rate...
...while Retail Sales had jumped to 6.3% year-on-year - it best level in over 2 years (see below).
And then came Inflation figures out the US that their Inflation rate had ticked up slightly to 2.7%.
The markets reacted sharply as the Dollar initially lost ground before recovering, but the Rand powered ahead regardless as it pushed all the way down to close out the day at R17.66 per USD!
And then, in other news:
Geopolitical Tensions Continue 🌍
It seems that things aren't simmering down internationally:
- Syria is now officially in the hands of terrorist rebels, with Israel taking action to take control of the buffer zone between them, while carrying out dozens of attacks targeting military and ammunition sites...
- Russia is pummelling Ukraine and gaining ground in the east, while NATO talking about preemptive strikes...
- South Korea is in turmoil with protests, impeachments and cabinet resignations following the president declaring martial law...
- Political upheaval continues in France and Germany...
- While in the US, things are in a state of flux and uncertainty as head towards the next administration, which is looking to completely overhaul the current federal establishment
Lots on the cards internationally to distract and cause ruptions in the markets!
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Thursday: The Party Ends✋
After one of the best half-week's in a long time, it initially looked like the Rand was going to continue piling on the pressure as it edged down to hit R17.62/$ - its best levels in a month...
...but, as all too often happens when it seems like there is no end in sight, the trend reversed - strongly!
In no time we were back up, testing R17.80/$ as the market was given an extra boost with the ECB deciding to drop rates from 3.4% to 3.15%...
...while US PPI had edged up to 0.4% month-on-month.
Somehow, the Rand managed to hold out any further losses to close the day a couple of cents below R17.80.
Friday: Rollercoaster Finish🎢
The Rand opened the day around R17.77, and before SA trading desks opened was already floundering...
...as the market broke higher and continued to do so, pushing up to hit R17.94/$ on the back of no real data (once again).
But the Rand was not going to end such a good week on a bad note, and managed to pull things back nicely in the afternoon to close out the week back around R17.82.
Overall, another positive week for the local currency, but the risk of volatility clearly has risen.
Volatility & Risk Analysis
Again, a less volatile week, despite all the goings on!
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The Week Ahead
And so, here we are, looking squarely at the last half of December - and sjoe, what a year!
We have some inflation figures and GDP data to digest, but once again, the markets are likely to be driven more by geopolitical events around the globe
Stay focused and informed, this ride ain't over!
Until next week!
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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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