Welcome to your next chapter in our Weekly Rand insights!
Another week, another battle for the Rand! From strong local PMI data to a narrowing current account deficit, the Rand had moments of strength. However, global events like U.S. payrolls, geopolitical tensions, and political turmoil in major economies kept the dollar in the driver’s seat.
Despite it all, the Rand held its ground, closing the week stronger than expected.
Here’s how it all played out…
Market Pulse 📊
- The Price Action: R18.23-17.95 range reflects moderate volatility driven by local PMI data and U.S. non-farm payrolls.
- The Technical Setup: Support initially held at R18.06 then R17.95, while resistance emerged near R18.23.
- The Momentum:Initial Rand weakness was countered by stronger local data, though global risks favored US dollar strength.
- The Risk Events: South African current account deficit data and U.S. payrolls drove key moves.
- The Outlook: Local fundamentals versus global uncertainties set the tone for the week ahead.
How are you managing this risk??
See below for more....
Key Moments (2 - 6 Dec 2024):
Some of the more critical factors affecting price action this week:
- Mixed Local Signals:Q3 GDP shrinks by 0.3%, while current account deficit narrows to R71 billion, beating expectations of R86 billion.
- U.S. Jobs Surge:Non-farm payrolls added 227,000 jobs in November, with unemployment up at 4.2%.
- Bitcoin Hits $100K: Bitcoin reached a milestone, underscoring institutional adoption and growing speculative interest.
- Political Turmoil:From South Korea to Germany, France and Syria, it seems that governments are facing uprisings
Monday: A Rough Start 📈
The Rand kicked off the week at R18.06/$, and was immediately on the front foot in early trade testing below R18.00 to the US dollar...
...but was soon on the back foot, as the market reversed strongly to test R18.18 before local banks had opened their trading desks, and then headed even weaker after Absa Purchasing Managers’ Index (PMI) showed a drop to 48.1 in November 2024, down from 52.6 in the prior month.
It pushed higher to hit R18.23/$ before the Rand managed to pull things back to close out the day at a more respectable R18.08/$
Tuesday: Choppy But Balanced 💵
Tuesday saw the Rand under immediate pressure, as initial trading pushed the Rand to its intraday high of R18.18/$...
...but the Rand once again showed some fight, as it managed to claw back all the lost ground ahead of GDP data release, which when it came, was a very disappointing 0.3% year-on-year ... a lot lower than expected.
This sparked a push back up to test R18.16/$...
...but again the Rand was up to the test, as it made up lost ground plus some to end the day at R18.06 to the greenback.
Wednesday: Risk-Off Woes Weigh on the Rand 📉
Geopolitical tensions in South Korea were the big story on Wednesday, setting a risk-off tone across global markets.
The Rand opened at R18.10/$ but was quickly caught in the crossfire as traders sought safety in the US dollar. An early high of R18.18/$ was quickly met with selling pressure, driving the Rand to its daily low of R18.08/$ by SA close...
...but then came along Fed Chair Powell's speech which seemed give the Dollar a boost, pushing the market back up to end the session at R18.15/$, reflecting risk-off sentiment globally.
And then, in other news:
Political Turmoil Across Key Nations 🌍
South Korea, France, Germany and Syria all faced political upheavals.
In South Korea, President Yoon Suk Yeol’s martial law declaration sparked impeachment proceedings. France saw Prime Minister Michel Barnier ousted over budget disputes, leaving President Macron in a precarious position. Meanwhile, Germany’s coalition collapsed, forcing Chancellor Olaf Scholz into a minority government. And then to end off the week and a long-running civil war, rebel forces led by former Al Qaeda chief Golani were on the brink of toppling Assad's regime in Syria.
New Wall Street Highs - and Bitcoin Smashes Through $100K 🚀
Wall Street surged once again to hit all-time highs on the Dow Jones, S&P500 and Nasdaq Index, as did the Dax, while JSE Top 40 came within a whisker.
Meanwhile, Bitcoin punched past the $100,000 mark to hit a new high of $103,647, reflecting growing institutional adoption and speculative interest as well as a more positive outlook with Trump's appointment of pro-crypto Paul Atkins as new chief of the Securities and Exchange Commission (SEC).
Did you see our email and post about how we predicted this when its price was back down below $16,000 - you can see it here
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Thursday: Deficit Relief Sparks Recovery ⚖️
The Rand opened at R18.14/$ and had a brief flurry higher before strengthening during the morning session to break below R18.10 before the release of Current Account data.
And with it came some relief as South Africa’s Q3 Current Account deficit had narrowed to R70.8 billion (1% of GDP), significantly better than expectations of over R75 billion, and the smallest deficit since Q3 last year.
This positive data pushed the Rand below R18.10/$ and then after a brief tussle, it managed to push even lower to close around the R18.00 level, reflecting cautious optimism of turning this around.
Friday: Jobs Data Drives Dollar, Rand Stabilizes 🔄
And then we were into Friday, as the market waited for the biggie of the month US Nonfarm Payrolls.
We initially saw a brief sortie above R18.05/$ before range trading until the news came through...
...which showed a rebound with 227,000 in new hirings, above expectations of 200,000, while unemployment upped to 4.2%
As can be seen from the above chart, while these may seem positive, the trend of both the new hiring and the unemployment are not encouraging...
...the payrolls has been on a downwards trend the last 3 years, while unemployment has been on the rise since 2023.
While these are nothing like what the likes of Saffers are used to, nevertheless for an economy which is a global driver, it is of concern...
,,,because when the US sneezes, the rest of the world catches a cold!
Anyway, it seems the markets weren't too impressed with the US dollar dropping sharply after the news, with the Rand benefitting as a result to drop down to the strongest levels of the week at R17.95/$...
...but the Dollar then managed to recover somewhat in US trade as traders pared their bets before the weekend, with the Rand closing out a few cents above R18.00...
...rounding off a pretty successful week, all considering!
And that was the wrap!
Volatility & Risk Analysis
Again, a less volatile week, despite all the goings on!
- The Average Daily Range was 14c or 0.79% - which still equates to a potential profit or loss of R9,000 every day for every R1 million exposure
- The Weekly Range (total fluctuation) from the highest point (R18.23/$) to the lowest (R17.95/$) was 28.7c or 1.6%. This means by taking action at the right time you could have saved or lost R16,000 for every R1 million exposure...
How are you managing this risk??
See below for more....
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The Week Ahead
And so, here we are into the second week of December?
The week has some inflation rate data coming out of the US and and ECB interest rate decision, but the markets are likely to be driven more by geopolitical events as persons absorb what is happening in the Middle East, Europe - and of course the US, where the change to a Trump administration is already making waves internationally.
Stay sharp, stay informed, and may your trades be ever in your favor!
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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