The financial world is fixated with the FED and how their monetary policy will shape market conditions, and thus far the Dollar has been the primary beneficiary of this speculation.?This week sees our own monetary policy announcement and the Rand is hoping for some local support!!
These are the mid rates at 6:30 today:
Brent Crude = $111.19 per barrel
- On Friday it was hoped that the Rand’s double top formation would see us break below R16.00 to the Dollar and that’s exactly what happened as we touched R15.98.?Unfortunately the move was fleeting with us plunging to R16.27 late on before closing the week at R16.16.??
- Once again the Dollar marched ever higher on Friday thanks to the market worrying about just how aggressively the FED is going to act over the next few months coupled with global growth concerns which are driving safe haven flows into the greenback.?With US headline CPI not falling by as much as hoped for last week, while their month-on-month core CPI reading actually increased, this has seen chatter of a 75 basis point hike come back onto the radar.?The Dollar Index set yet another 20 year high of 105.01 on Friday which spelt bad news for the Rand as we fell to R16.27.??
- The week ahead is littered with key US market data as well as seeing a number of FED members speak, most notably of those being FED Chair Jerome Powell who will give an address on Tuesday.?The market has fully priced in 50bps moves by the FED in their June and July meetings but nervous jitters around a surprise 75bps move is keeping the Dollar well bid.?At their May policy meeting Powell was careful to point out that 75bps was not being considered and the Rand is hoping that he uses tomorrow’s forum to drive the point home.
- The following is from Reuters and talks to the week ahead:??"Broad USD strength is being supported by a mounting global growth concern," said Barclays analysts. They said events to watch this week included U.S. retail and production data due Tuesday, as well as public remarks from several FED officials. "Focus will be on any potential reiteration/pushback on the notion that 75-basis point rate hikes are off the table for now." Chinese retail and production data due later on Monday are also top of the agenda. "A weaker growth outlook in China is likely to keep commodity G10 currencies under pressure and the USD supported," said Barclays.
- The excerpt above references Chinese market data which has since been released, and the numbers are not good for the Rand.?Their April retail sales fell by -11.1% when a -6.1% contraction was forecast while industrial production was forecast to expand by 0.4% but actually fell by -2.9%.?The Rand has reacted as expected to these downbeat data sets and we’ve fallen to R16.24 early on.?
- Locally all eyes will be on SARB governor Lesetja Kganyago this Thursday afternoon as he delivers our latest monetary policy announcement.?With CPI being released on Wednesday, and with forecasts calling for a jump to 6%, there is a strong chance that a 50bps interest rate hike is announced which should give some support to the Rand.??
- No local market data today.??
- Possible USD mid rate trading ranges in the Rand today are R16.05 and R16.35.?