Rand Report 01/12/2023
Good morning
Excited guests who had signed up for a 3 year cruise around the world were left disappointed after the departure date of 30 November failed to materialise.? While an undertaking of this size would have its challenges, visiting 375 countries and covering 208?000km, the main reason why the cruise was cancelled is because the operator doesn’t have a ship.??
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These are the mid rates at 5:55 today:
?USD = R18.86?
AUD = R12.45
GBP = R23.83
DXY = 103.40
EUR = R20.56
Brent Crude = $80.41 per barrel
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Market News:
·???????? After drifting on its own for a few days the Rand finally fell in line with Dollar movements yesterday, but unfortunately that meant losses for us as the Dollar strengthened.? We opened the day at R18.71 to the Dollar, traded progressively weaker to hit R18.95 before closing the day and the month at R18.85.??
·???????? The Dollar Index fell over November as bets that the FED are done hiking interest rates intensified while speculation that they might start cutting rates as soon as March next year also started gaining traction.? This combination saw the greenback suffer a 3% retreat over the month, its biggest monthly fall in a year, but unfortunately those losses did not translate into Rand strength as local headlines weighed on our currency.? Yesterday saw a surprise spike for the Dollar despite US data which would suggest Dollar weakness, but this time the Rand responded as it should by giving up ground.??
·???????? Yesterday’s movements started off making sense but then became a bit of a head scratcher.? Early headlines saw Eurozone inflation falling from 2.9% in September to 2.4% in October, significantly below the forecast of 2.7% and a clear indication that the ECB’s rate hiking cycle is done while increasing chances of a rate cut in the near future.? As would be expected this weighed on the Euro which pushed the Dollar Index up, but in the afternoon session we got data out of the US which analysts assured us would pull the Dollar lower, but no such weakness arrived.??
·???????? The market was watching two US data sets yesterday, their initial weekly jobless claims as well as the PCE inflation report, with both having the potential to nudge the Dollar lower should they move higher and lower respectively.? That’s exactly what we got with jobless claims jumping from 209?000 to 218?000 while the core PCE reading fell from 3.7% to 3.5%, but rather that spell trouble for the Dollar the index went on a run from 102.73 to 103.57 and in so doing knocking the Rand right back to R18.95.? Whether this was profit taking on Dollar short positions or just a standard pullback after falling so far is unclear, but the net effect was a weaker Rand coupled with a monthly loss for us.? ?
·???????? The following is from CNBC:??The Dollar gained on Thursday as investors took profits on bets the currency would weaken further and shrugged off data showing signs the U.S. economy is slowing. Thursday's economic data suggested that the FED is likely done raising interest rates and may start easing by the middle of next year, typically a Dollar-negative factor. Some analysts said the Dollar may have benefited from month-end demand, as investors squared up positions for November, a period that featured a sharp sell-off in the US currency with the market pricing in rate cuts next year. "We were expecting Dollar selling at month-end given how much US equities rallied. That typically means foreign asset managers would have sold Dollars forward," said Vassili Serebriakov, FX strategist, at UBS in New York. "But it's possible that some of the selling happened earlier in the month. So maybe there's less Dollar selling at month end."
·???????? We start the final month of the year on the back foot, and worryingly for the Rand we still have FED Chair Jerome Powell’s speech to navigate this afternoon.? Several FED members have been surprisingly candid in their talk around the FED having done enough, and even suggesting that rate cuts could be appropriate in the coming months, so there is a chance that Powell will try to set the record straight by squashing any prospects of a cut until inflation is back at 2%.
·???????? Local market data today sees our November manufacturing PMI as well as new vehicle sales for the month.? ?
·???????? Possible USD mid-rate trading ranges in the Rand today are R18.70 and R19.00.
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