Forex Market Report - 30 April

Good morning

A good start to the week as the Rand managed to touch R14.29 to the Dollar, but weaker than expected data out of China this morning could put the brakes on our recovery.

These are the mid rates as at 8:20 today:

USD = R14.36

AUD = R10.10

GBP = R18.57

NZD = R9.55

EUR = R16.05 Brent Crude = $71.86 per barrel

Market News

? The Rand’s mini recovery remained in tact yesterday after we finally got onto the front foot last Friday. We opened at R14.37 to the Dollar and strengthened to R14.29 by the early afternoon but unfortunately gave up some of those gains to close at R14.32.

? Yesterday’s gains was a continuation of Dollar weakness which was joined by a spike in appetite for riskier assets like the Rand. Lower than expected consumer inflation in the US kept the Dollar under pressure while data out of China showed that industrial profits grew for the first time in four months. This upbeat Chinese print was good for emerging market currencies and drove the Rand to R14.29.   

? Unfortunately Chinese data today has counted against us as their April factory activity grew by a slower pace than expected (50.1 actual versus 50.5 expected) and this has seen risk appetite cool. The Rand has slipped to R14.36 as a result.

? The Rand will now turn its attention to the Q1 2019 Eurozone GDP figure expected later today. Recent European economic activity has been tepid to say the least and the Euro has been a drag on the Rand as a result, but with forecasts now calling for a slight uptick in activity that should boost the Euro and support the Rand.

? The following is from CNBC and points to a massive accumulated short position on the Euro which would need to be unwound should Euro GDP surprise to the upside: Forecasts are for a modest rise of 0.3% in the first quarter, although that would still be faster than the previous quarter and may be taken as a sign of stabilization. Even such tentative growth could squeeze speculators who have been amassing large short positions in the Euro, worth a net $14.8 billion in the week to April 23.

? A stronger Rand / Dollar exchange rate looks more and more likely following the FED’s monetary policy announcement tomorrow night. Yesterday the FED’s preferred inflation indicator, personal consumption expenditure (PCE), mirrored last week’s lower consumer inflation index by dropping to 1.6%. This is further away from the FED’s target of 2% PCE and would strengthen the case for an interest rate cut later in the year (Dollar negative).

? Local market data today sees our private sector credit extensions (which just came in higher than expected) followed at 2pm by our trade balance for March. A surplus of R4.8bn is forecast with any figure significantly above this likely to be Rand positive.

? Possible USD mid rate trading ranges in the Rand today are R14.25 and R14.55.

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