Welcome to another issue of our Rand Review, as we take you through another week where the Rand once again faced its fair share of turbulence.
From Eskom's load-shedding saga to international economic and political tremors, join us as we explore how these factors intertwined to influence the Rand's journey...
...and quite a journey it was, as we saw the market whipsaw through the week...
...as the Rand came out strong...then was soon against the ropes...
...but somehow managed to pick itself off the canvas and make a comeback to end the week in the green.
Without further ado, let's get into it to see how it all panned out:
Key Moments (12- 16 February 2024)
Some highlights from the past week were the following:
- Eskom's Load Shedding Drama Continues: The unwelcome return of Stage 6 load shedding casts long shadows on a battling economic landscape
- Global Economic Tides Turn: From US inflation surprises to retail sales scares, the world's largest economy kept investors and currencies, including the Rand, on their toes.
- US Property Market Woes: January's dip in existing home sales was a window into the broader economic challenges, resonating across global markets.
Before we get into the week's events, let us share the heads-up that us and our clients had going into the week...
While most were looking at what and how all the news and events were likely to affect the Rand, we instead simply kept our eyes on what our Rand forecast modelling was telling us...based on the patterns of sentiment that were playing out.
And based on our USD/ZAR short term prediction published on the prior Friday, this told us (with 75% probability) that we could likely expect more upside into the 19.12 to 19.21 area, with a possible reversal in this resistance area, as can be seen below.
(Click to enlarge)
It was going to be another interesting week, it seemed, if this all played out...
And with that, the week opened with the Rand back below R19/$ in early trade...
...but by SA banking open, it had ticked up to test R19.07/$, as the markets digested the events of the week before and anticipated what lay ahead.
But after a week that ended with that rosy picture painted by Ramaphosa in his SONA speech - of a future where load shedding was like a ghost of the past...
...the country was quickly brought back to earth with a bump over the weekend, per kind favour of...you guessed it - Eishkom!
For the first time in nearly 3 months, the embattled SOE escalated load shedding to Stage 6 until further notice!
According to their statement on Saturday evening, at least 10 generating units had been taken out of service since Thursday, five of which were due to boiler tube leaks...
Whatever, this was the last thing Saffers needed to hear, with the ever-present challenges in an economy that has been battling as it is...
...yet it is something most have come to expect from a government energy provider.
Interestingly though, the Rand seemed to take it in its stride as it recovered through the day to test R19.85 in after-hours trade!
And Tuesday saw it open in SA trade in the lower R18.90s - and it continued its merry push lower to test R18.80 by mid-afternoon...
And then it all changed...
...as inflation came as a bit of surprise to the market, which showed the rate in the US fell back to 3.1% in January following a brief increase to 3.4% in December - but still higher than forecasts of 2.9%...
...which highlighted that inflation was not going away.
This of course, put a damper on any possible rate cuts.
And the beneficiary was the US dollar, as the DXY (Dollar Index) pushed up to hit its best level in 3 months.
And the Rand?
But it wasn't only the Rand...
....it was major and emerging currencies.
And it wasn't only currencies...
...as US stocks took a tumble following the news, with the S&P losing more than 1% and the Nasdaq almost 2%...
being a collapse waiting to happen?
As for the Rand, it continued to lose value in the hours that followed, testing R19.17/$ before dropping back to around R19.10 in after-hours trade...
Wednesday dawned with the Rand around R19.10 to the Dollar after initially range-trading, it tested higher to hit R19.19...
...and just when it looked that it was ready for the knockout punch, the Rand bounced back off the ropes, recovering to end the day around R19.05/$...
...and is so doing, perfectly validating our forecast from the week prior.
(Now which economist could have predicted such an exact move - ahead of time?)
- Meanwhile, in other news:
Across the pond, US Existing Home Sales dropped by 1% from a month earlier and 6.2% from a year ago to 3.78 million units, reaching its lowest level since August 2010...
...which was after the housing bubble burst back in 2007-2009!
Ominous signs?
Getting back to the Rand, on Thursday opened and the market hovered around the R19.05/$ level before strengthening to test R19.00 ahead of US Retail Sales release.
And the news, when it came, seemed to spook the markets, with Retail Sales falling sharply in January, declining by 0.8% - much more than expected, raising concerns that the economy was starting to head south.
And of course, the market reacted...
...the Dollar weakened off its highs...
...and the Rand took advantage by driving stronger to push below R18.95.
And then Friday saw the local currency power on, with a small blip, to end the week in the green.
A pretty impressive performance overall!
The Week Ahead (19 - 23 February 2024)
As we head into the second half of February (already), there are a few events to keep our eyes on:
- SA - Inflation Rate, Budget Speech
- US - Jobless Claims
- EU - CPI
So not a lot of triggers, but expect volatility nevertheless!!
To keep abreast of the Rand's gyrations, view our live rates chart.
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 showed in the past week's move -
to make the RIGHT decisions...and take the RIGHT action...
...at the RIGHT time!
Hit the link below to get access to our latest predictions.
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!
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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