And welcome to the next issue of your favourite Weekly Rand Review...
Well, the good times couldn't last forever - and they didn't...
...as the Rand was pretty much on the back foot from the get-go and for most of the week - before bouncing back on Friday.
What is of importance is whether you saw this coming?
Because we were expecting this (as you will see below), based on what our forecasting system was telling us was the most likely scenario to play out .
It was a week of mixed fortunes locally and some signs of a stuttering economy in the US...
...and it seems it wasn't just the economy that was stuttering, as the Dems presidential campaign took a big knock following the first presidential debate.
Anyway, let's dive into the details to how things panned out for the Rand
Key Moments (24-28 June 2024):
In some major headlines over the last five days:
- Mixed SA Data Signals: PPI, Consumer Confidence and Trade Balance provide mixed signals for the Rand.
- Slowing US Economy: New Home Sales, GDP, and Durable Goods Orders indicated a slowing US economy.
The Rand started the week on a really positive note, having come off a sterling fortnight of strength, having gained almost 7% against the US dollar.
But as we said last week, our forecasting system was showing that the local currency was likely starting to run out of steam, and that we could be in for some surprises...
...as could be seen from our short-term forecast of the previous week, which showed a move down into the 17.88-17.69 target area before bottoming out and rising...
(Click to enlarge)
Monday opened with the market around R18.00 to the USD, after having hit a low of R17.86 on Friday afternoon.
Almost immediately, the Rand faced early pressure, as it lost ground all morning and into early afternoon, testing R18.24/US$, but it managed a comeback in the afternoon, clawing back lost ground to close out the day back below R18.10/$.
Tuesday started off with the Rand caught in a narrow trading before the SA trading desk opened...
...but then it broke loose, as the Dollar dominated the day, pushing the Rand weaker as it touched R18.27/$ before holding on to end the day around R18.23 per USD.
Wednesday started off with the Rand again caught in a range but again broke out on the upside as the Rand tested even higher, pushing all the way to hit R18.35 to the Dollar...
...but the Rand finally managed to get some fight back, as it rebounded strongly, pushing the market all the way back to end the day around R18.35/$.
In a significant metric, US New Home Sales slumped by a full 11.3% from the previous month (the biggest drop since September 2022), sparking real fears of recession - as well as a repeat of the 2008 financial crisis.
From a political point of view, there was also the ongoing eager wait for Ramaphosa to announce his cabinet...
...while across in the US, all eyes were on the much-anticipated presidential debate between nominees Trump and Biden on Thursday.
From the Rand's point of view, it had managed to partial rebounds, but what did the latter half of the week hold in store?
Well it was time for an update.
And thankfully, us and our clients received some indication from our short-term update late on Wednesday, with the bias being for a move higher into the R18.45–18.69 region, as per the prediction below...
...it seemed some more fireworks were in store.
(Click to enlarge)
And the Dollar didn't disappoint!
It had flexed its muscles the first few days, but it kept its best for Thursday...
...after a listless start, with the Rand around R18.15/$, the market then shot up all of 25c to test above R18.40 by midday...
...and then the greenback drove home the advantage as the USD/ZAR hit R18.52, before giving back some ground to end the day below R18.45.
In the process of course, perfectly validating our prediction of just a day earlier...
...which was really satisfying, especially if our clients benefitted from this call.
This came amidst some mixed signals locally, with the latest Producer Price Inflation (PPI) coming in at 5% - lower than expectations, but Consumer Confidence dropping to a negative 18 reflecting increasing pessimism among consumers.
While across in the US, Durable Goods Orders managed to eke out a 0.1% increase MoM while GDP Growth QoQ fell from 3.4% the previous quarter to 1.4%, showing an economy that is battling against inflation costs...
...these numbers, of course, are themselves skewed by price increases being the US dollar value, not the quantity of goods ordered...
From a global geopolitical perspective, all the economic data was overshadowed by the CNN-hosted US presidential debate late on Thursday evening...
All one say is...
Eish!
To say that this was an unmitigated disaster for the Democrats is an understatement, as their current nominee put on anything but a show of presidential competence...
...sparking panic in their ranks with just 4 short months to go before the elections!
Some interesting weeks lie ahead...
And then it was Friday - and at the start it looked like the week was going to be a one-way street, as the market pushed even higher, again testing above R18.50...
...but the Rand was not finished!
In fact, it put on one its best one-day efforts for some time, as the market reversed sharply...
...dropping over 30c in a few hours, and then holding on to end the day and the week around the R18.20 level.
It was no doubt helped with some positive local data with South Africa notching up a trade surplus of R20.1bn in May (the highest surplus in six months) - and more than double the downwardly revised R9.68bn in April.
So even though it was a red week, it ended on a lot brighter note than it looked just a few short hours before...
The Week Ahead (1-5 July 2024)
Well, that's it - we already into the latter half of 2024, and we don't seem to be slowing down anytime soon.
And Monday dawned with news that Ramaphosa had settled on his cabinet - a bloated one of 32 ministers and 43 deputy ministers (who pays these guys' salaries again?)
What is of interest is that despite getting less than 40% of the vote, the ANC have secured 62.5% of the cabinet posts, while the DA have been given just 6 seats...
...me thinks a rocky road lies ahead!
Some economic releases to keep your eyes on this week:
- SA: ABSA Manufacturing PMI
- US: Fed Chair Speech, Non Farm Payrolls, Unemployment
- UK: General Election
- EU: Inflation
So, the Rand's fortunes seemed to reverse last week - and then reverse partially again.
What does that mean for the days and weeks ahead?
Based on Friday's latest update, we have a bit of a ding-dong battle going on between two potential scenarios...
...which should be resolved this week!
We should have some interesting days ahead!
Are You Making Informed Decisions?
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To give you a little helping hand, feel free to take our Rand forecasting service for a test-drive!
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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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