MARKET NEWS 11/02/2021

Good morning

Load shedding during the night is definitely less disruptive from an economic perspective but when you wake up at 2am to total darkness, dead quiet and the oppressive Durban humidity you know you are in for a long 2 hours. And let’s not even mention the mosquitos!!!

These are the mid rates as at 7:05 today:

USD = R14.73

AUD = R11.39

GBP = R20.40

DXY = 90.40

EUR = R17.85

Brent Crude = $61.32 per barrel

Market News

• After posting decent gains this week the Rand fell back in the afternoon/evening sessions yesterday which is understandable as in the world of finance nothing goes in the same direction for too long. We opened yesterday at R14.70 to the Dollar and choppy trade in the morning saw us bounce between R14.74 and R14.65, but we later moved to R14.76 where we stayed.
• Dollar moves typically drive Rand price action and after a brief break from this pattern last week, when our local headlines took centre stage, yesterday was back to business as usual with the Rand/Dollar chart closely mirroring moves in the Dollar Index. Fortunately for the Rand, while we may have ended up slightly weaker on the day the Dollar Index remains under pressure thanks to developments in the US which signals that our recent move below R15.00 should be sustained for a while (Budget Speech allowing).  
• US core consumer inflation was unchanged for the second month in a row yesterday which translates into their interest rates staying anchored at close to 0% and is Dollar negative. Compounding the near term outlook for the Dollar was FED Chair Jerome Powell’s address at the Economic Club of New York where he underlined the dire state of the US labour market despite various analysts’ bullish projections for later this year once vaccinations are commonplace. Powell said that the FED will employ “patiently accommodative monetary policy that embraces the lessons of the past” which is another way of saying their asset purchasing program coupled with an interest rates close to 0% will not change for the foreseeable future. This is good news for the Rand.  
• The following is from Reuters and points to the Rand not being exposed to the threat of Dollar gains:  The Dollar was pinned near two-week lows on Thursday as softer than expected US inflation, and another FED promise to keep interest rates low, reinforced expectations of meagre returns from the reserve currency. “Easy policy is going to stay there for a long, long time, and that should be negative for the US Dollar,” said Westpac currency analyst Imre Speizer. “I think it’ll be something that sits in the background, as just a reminder that the US Dollar can’t go up while it’s got that easy policy relative to everybody else.”
• The first of February’s two main local events is looming large as Cyril Ramaphosa delivers his State of the Nation Address (SONA) tomorrow night. Typically these nights tee up government’s plans for the year ahead and then leave it to Tito Mboweni to tell us how they will be paid for in his Budget Speech two weeks later. But Ramaphosa will be closely watched for policy around ailing SOE’s like Eskom and SAA given the severe strain COVID has placed on the fiscus. The Rand could also react to updates on government’s infrastructure plans and job creation initiatives.  
• Local market data today sees December’s mining production stats at 11:30 followed by manufacturing production at 1pm. These are unfortunately to both forecast to contract given international and local lockdown restrictions at the time.  
• Possible USD mid rate trading ranges in the Rand today are R14.60 and R14.90.