You get cold weekends and then you get this weekend just gone by!!!?Could Winter 2021 please just pack its bags and head off to the Northern Hemisphere because when temperatures in Durban drop to 5c at mid-day while we get snow in Hillcrest then things have gotten seriously out of control.??
These are the mid rates at 7:20 today:
Brent Crude = $72.36 per barrel
- Our teeth might have been chattering but the Rand was warming itself next to the dying Dollar bull embers over the weekend.?4pm on Friday was the week’s main event and it didn’t disappoint with an immediate and outsized move in the currency market with the Rand shooting from R14.94 to the Dollar to R14.70 in a matter of minutes.??
- With the Rand posting a 4% gain against the Dollar last week, and with a large chunk of those gains coming on Friday afternoon alone, it’s safe to say that Jerome Powell’s speech went our way.?The FED Chair is usually more cautious than his counterparts and so him denting the Dollar’s rise by not giving the exact tapering detail that the market craves is not a surprise.?But in a deft move Powell noted that while their economic recovery will justify reducing their monthly asset purchasing program at some point this year he pointed out that tapering will not automatically lead into rising interest rates once complete, and the market went into a tailspin.??
- Powell’s comment that in order for the FED to consider lifting US interest rates their economy would have to pass?“a different and substantially more stringent test”?was exactly the new addition to their often repetitive narrative that the market was looking for.?We always knew that tapering could start in 2021 which once underway should end somewhere around the third quarter next year.?But while the market previously thought this would roll directly into interest rate hikes there could now be a gap, and the length of this gap will be the hottest item of debate over the coming months.?Just the prospect of a gap means that rate hikes are now further away than first expected and the Dollar Index plunged from 93.16 to 92.60 with the Rand enjoying the ride to R14.70
- The following is from CNBC:??The Dollar was nursing losses on Monday and kept near multi-week lows after FED Chair Jerome Powell laid out a slower-than-expected path to rate hikes.?Traders latched on to the wiggle-room in the rates outlook and sold Dollars with the dollar index ending Friday with a 0.4% loss and picking up on Monday more or less where it left off.?“Powell was vague on the timing of tapering, and his reiteration that it is separate from a decision to raise rates was read to imply that there’d be a gap,” ANZ analysts said in a note. “That has, in turn, seen the market take a Goldilocks view of the FED, stimulus will be reduced but not so quickly as to snuff out the recovery.”
- All is not lost for the Dollar bulls as while Powell kept his cards close to his chest on when the FED might start to taper he did say that further progress in their economic and labour recovery would justify starting in 2021.?That sets up this Friday’s monthly US jobs report nicely, and with them having registered 938K and 943K new jobs in the past two months a third consecutive month in this vicinity will surely be enough to get the tapering ball rolling sooner rather than later, and this should support the Dollar while hurting the Rand.
- Locally we have a difficult week ahead where we get trade balance and manufacturing purchasing manager data for July, a month that was beset by a COVID lockdown, devastating looting and the disruption of port activity thanks to a cyberattack.?This triple blow will no doubt pull these data points lower and could impact the Rand, although Powell’s lift for risk assets may just override any downbeat local news.??
- No local market data today.
- Possible USD mid rate trading ranges in the Rand today are R14.60 and R14.90.?