For the second time this year Iran has launched a wave of missile attacks on Israel and just like the previous event in April investors are flocking into safe haven assets including the Dollar.? Also like in April, hopefully cool head prevail within a very short space of time.?
These are the mid rates at 5:55 today:
Brent Crude = $74.57 per barrel
- The world once again is watching the Middle East with concern as tensions significantly increased yesterday and for the Rand this can mean only one thing, weakness.? We opened yesterday at R17.29 to the Dollar and managed to touch R17.23 as the day’s best level before a combination of US data and the Iranian attack sent us to R17.47 late on.?
- For weeks, and even months, the currency market has been focused on monetary policy ramifications in the US while largely ignoring the steady build-up in tensions across the Middle East but that changed yesterday, and the reaction was exactly as one would expect it to be.? Not wanting to wade into the political/ideological dynamics of what’s going on, but after a series of assassinations carried out by Israel on Iranian backed Hezbollah officials Iran finally made good on their promise to retaliate and yesterday they launched over 180 missiles at Israeli military assets.? The attack was largely intercepted but footage of missiles streaming across Israeli skies was enough to spook the market with equities and the Rand taking a knock while the Dollar Index advanced.
- The next few days will be crucial in deciding whether this is another short-lived flashpoint, or the start of a longer and more worrying offensive, but while it is still too early to tell the initial signs are sort of encouraging.? US equities closed in the red last night but well off their lows from earlier in the session while the Dollar Index has also pulled back a little, these moves ostensibly because Iran has declared that their actions have been concluded unless faced with further provocations from Israel.? The US and Israel have not ruled out a retaliation of their own but the Rand will be hoping that no further missiles are launched in either direction.?
- Safe haven flows supported the Dollar but it also got a boost from a series of stronger than expected US data reports, data that underlines the resilience of the US economy and therefore lessens the “need” for another 50bps interest rate cut in November.? Their manufacturing PMI came in higher than forecast and construction spending improved, but the real eye catcher was the monthly job openings report which surprised with an increase to 8 million vacancies available.? An increase in the number of available jobs is sign of a strong labour market and supports Jerome Powell’s recent comments that the FED need not be in a hurry to cut rates.? This is a Dollar positive development and would have weighed on the Rand.?
- International headlines went against us yesterday but we got very good news on the local front as our September manufacturing PMI delivered an impressive jump to 52.8, sharply up from a lowly 43.6 in August.? No load shedding, improving local demand and an increase in export activity all contributed to this big move higher and the following from Business Day suggests that further strength can be expected:? “Although the latest PMI data continues to reflect high volatility in the SA manufacturing sector, the results align with our view that the struggling sector may have turned a corner,” Jee-A van der Linde, a senior economist at Oxford Economics. In addition, easing supply-side constraints, lower fuel prices and interest rate cuts suggested that demand conditions would improve further during the second half of the year, which should translate into stronger economic activity.
- No local market data today and all eyes will be on the Israel-Iran conflict, hopefully with no new developments to report.?
- Possible USD mid rate trading ranges in the Rand today are R17.15 and R17.45.
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