Rand Report 03/03/2023
Good morning
The good news is that an annual Reuters currency poll is predicting that the Dollar will be weaker in 12 months from now.?The bad news is that this same poll predicted a weaker Dollar for 5 years before it was finally correct in 2020!!!
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These are the mid rates at 7:00 today:
USD = R18.19?
AUD = R12.27
GBP = R21.78
DXY = 104.87
EUR = R19.31
Brent Crude = $84.50 per barrel
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Market News:
·????????Predicting movements in the currency market just 24 hours out is an impossible task so we can take the 12 month calls with a pinch of salt, but what we can do is look at recent history to get a sense of direction.?The Dollar Index is on track for its first weekly loss since early January and that is good news for the Rand as we’ve moved from R18.45 on Monday morning to R18.19 today.??
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·????????The Rand drifted sideways yesterday as we opened at R18.17 to the Dollar and pretty much stayed around that level, except for the briefest of runs to R18.12.?Our ability to remain unchanged was actually a bit of an achievement as the Dollar advanced on the day which should have sent us weaker, perhaps the feelgood factor from China’s strong economic rebound was still shielding us.?In the US we had yet another data release that the FED didn’t want to see, this as their weekly initial jobless claims came in lower than expected which is good news for the economy but bad news for the FED as they try to cool demand.?The Dollar strengthened on increased speculation that the FED still has multiple rate hikes to deliver.??
·????????Fortunately the Dollar’s move higher was capped when FED member Raphael Bostic said that he is “firmly in favour” of sticking to 25bps hikes at future meetings.?The market is a skittish place, and with recent US data coming in strong the notion of the FED going back to 50bps moves had started creeping back onto the table and so Bostic’s comments allayed these fears and cooled Dollar strength.??
·????????Today is services purchasing managers’ index day and we wait on our report this morning as well as reports from major economies around the world.?It’s encouraging that things have started off well with China announcing a massive jump with their services PMI climbing from 52.9 in January to 55.0 in February.?On Wednesday we saw a huge jump in their manufacturing PMI supporting risk assets like the Rand, so hopefully that trend continues today.?
·????????Taking a quick look at the Reuters currency poll mentioned above the overwhelming consensus is that the FED is close to the top of their interest rate hiking cycle while the European Central Bank still has some distance to cover.?The prediction is that when we get to a scenario where the FED has paused while the ECB is still hiking that will attract flows into Euros and the Dollar will fall back, the only problem is that we don’t know when the FED will pause.?The FED’s next policy meeting is on the 22nd?of March and Jerome Powell’s comments will be scrutinised for any clues.??
·????????Local market data today sees our February services PMI release at 9:15.??
·????????Possible USD mid rate trading ranges in the Rand today are R18.05 and R18.35.?
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