The wave of shortened weeks has well and truly arrived with four out of the next five weeks giving us an extra day off.?We may have an easy run ahead but in the US, since 1928, April has been the second best month for stocks which suggests welcomed risk-on sentiment awaits the Rand while we relax on the beach!!!
These are the mid rates at 6:10 today:
Brent Crude = $84.07 per barrel
- April may hold some promise for the Rand but we are starting the month on the back foot, although still nicely below recent levels.?Last Friday saw us build on Thursday’s gains as we touched R17.70 to the Dollar late on but this morning has seen us knocked back to R17.88.??
- Last week was a quiet one as we waited for our interest rate announcement on Thursday and the US inflation report on Friday, and fortunately for the Rand both went in our favour.?The Reserve Bank came out way more hawkish than anybody expected in hiking our interest rate by 50bps, a move that sent the Rand comfortably below the R18.00 barrier that it had struggled to break for some time.?And then on Friday the US personal consumption index came in softer than expected across every metric which was a great tailwind for stocks while also weighing on the Dollar.??
- On Friday it looked like the Dollar was set for a period where it would lose ground against the Euro, and therefore allow the Rand to gain ground, and the following is from CNBC:??The FED is seen as about as likely to raise its benchmark overnight interest rate in May as not. But even if it does, it is expected to reverse course quickly and end the year with rates lower than it began, according to futures contracts tied to the US central bank’s policy rate. “My gut feeling is that the FED will go for another 25bps in May, and that will be it.?But the ECB I can see hiking aggressively still into the summer,” Stuart Cole, head macro economist at Equiti Capital, said. “You can potentially see that being positive for EUR/USD from the interest rate perspective.”
- The frustrating thing about the currency market is that almost anything can move the dial, and just when the stars are aligning with a clear path to Dollar weakness we get an unexpected headline which depth charges the whole scenario.?OPEC+ is supposed to be to cutting oil production by 2 million barrels a day but yesterday they delivered the shock announcement that this number will be increased to 3.6 million barrels with the excuse being that they are getting ready for lower demand due to recessionary pressures.?The immediate impact however is that the price of oil rocketed by 8% which has restoked inflationary fears, and all of a sudden the FED presumably has more work to do.?The Dollar Index jumped while the Rand fell back in early trade this morning.??
- The following is from Reuters:??The Dollar started the week higher as fears over inflation resurfaced after a surprise announcement by major oil producers to?cut production further, with traders wagering the FED may need to increase interest rates at its next meeting. "While receding broader contagion risks, positive developments in China and expectations that the FED is nearing the end of the tightening cycle should keep sentiments broadly supported, the recent oil price gain due to the surprise production cut is a fresh risk to inflation," said Christopher Wong, a currency strategist at OCBC in Singapore. "Fresh inflation risks do imply the inflation fight is not over."
- Locally we have a busy day today as we get our March manufacturing production stat as well as our new vehicle sales, although the day’s main event will be the SARS announcement on their 2022/2023 financial year tax collection.?Tax revenues are expected to smash the Feb 2022 budget forecast while even eclipsing the October mini-budget forecast by at least R10bn so hopefully a blowout number will be good for the Rand.??
- Local market data today sees our manufacturing PMI at 11:00 and our new vehicle sales at 2:30pm.
- Possible USD mid rate trading ranges in the Rand today are R17.70 and R18.00.??