With the US market back from their long weekend the week for the currency market starts in earnest today, but there’s a good chance that price movements will remain muted as traders wait for what’s being billed as the most important labour report of the year on Friday afternoon.?
These are the mid rates at 5:55 today:
Brent Crude = $77.22 per barrel
- Dollar holidays are not known for dramatic price action in the currency market and yesterday played out just as expected.? We did suffer a minor setback during the morning session with a fall to R17.92 to the Dollar, but luckily those losses didn’t stick and we closed exactly where we opened they day at R17.86.
- With very little happening on the international front the Rand sliding to R17.92 was probably down to a particularly poor local manufacturing report which showed that activity in August fell to its second lowest level this year.? July’s reading of 52.3 was expected to pick up to 53 last month, especially when considering that we are deep into the current run of no load shedding, but it wasn’t to be with our manufacturing PMI coming in at a surprisingly low 43.6.? Hopefully this was just an anomaly with manufacturing set to climb back into expansionary territory in the near future, but on a data light day this could have been enough to dent the Rand.?
- Yesterday got off to a slow start internationally but we now have a number of data releases to navigate before we get to the week’s main event on Friday.? As things stand it looks like the Dollar Index has a mildly strengthening bias which could make it difficult for the Rand to improve our position, this as the Dollar suffered its worst month in over a year during August and so a retracement from depressed levels is to be expected, but also because US data has been well behaved and is not pointing to the FED cutting by an emergency 50bps in two weeks’ time.? With a rather packed economic calendar for the next few days let’s see if this gentle Dollar recovery remains in place.
- There’s lots for the market to digest this week but all eyes are actually on Friday’s monthly US jobs report.? Last month’s report sent the equity market into freefall while shooting the Dollar Index higher as a safe haven asset, and the Rand (and stocks) is desperately hoping that this is not repeated later this week.? Forecasts can get things horribly wrong but the figures suggest that the US will add 165?000 new jobs in August, up from 114?000 in July, while their unemployment rate could drop from 4.3% to 4.2%.? With the FED now paying close attention to that unemployment stat a drop to 4.2% would all but eliminate the need for a 50bps rate cut, and in so doing support risk assets like the Rand.?
- The following from CNBC talks to the market’s positive reaction should Friday’s jobs report come in as expected while also suggesting that the Dollar could be on the front foot in the build-up:? The Dollar climbed to a two-week top against the Euro on Monday as traders pared bets for aggressive policy easing by the?FED with the focus now moving to a crucial US jobs report at the end of this week. Traders currently lay 33% odds of a 50-bp Fed rate cut this month, versus 67% probability of a quarter-point cut. A week earlier, expectations were 36% for the larger reduction. “Should the US economy add 150,000 jobs or more and the unemployment rate ease to 4.2% or below, it would increase confidence that the economy is on target for a soft landing,” cementing expectations for a 25-bp rate reduction this month, said IG analyst Tony Sycamore.
- Local market data today sees our Q2 2024 GDP report at 11:30 which is expected to improve from 0.5% annualised in Q1 to 1.6%.? ?
- Possible USD mid rate trading ranges in the Rand today are R17.70 and R18.00.
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