“Overall, I feel like an MMA fighter who keeps getting inflation in a choke hold, waiting for it to tap out, yet it keeps slipping out of my grasp at the last minute. But let me assure you that submission is inevitable, inflation isn’t getting out of the octagon.” A colourful analogy used by FED member Christopher Waller to describe the fight against inflation.?
These are the mid rates at 5:45 today:
Brent Crude = $71.95 per barrel
- While not in a choke hold the Rand definitely started the week on the defensive yesterday with three separate narratives weighing on our exchange rate.? After closing last Friday at R18.06 to the Dollar we quickly fell to R18.16 yesterday morning before later slipping to the day’s worst level of R18.22.?
- While there were a number of moving parts yesterday the day’s biggest headline was Donald Trump’s threat of a 100% tariff on any country that tries to undermine the Dollar’s status as the world’s reserve currency.? With Trump making specific reference to the much talked about BRICS currency, and with him also insinuating that that trade with the US could be completely revoked if we’re seen to be plotting the Dollar’s demise, this was a shock to markets and the Rand fell back.? It has been quickly pointed out that a BRICS currency is only a conceptual idea thus far, and very far from actual implementation, while Cyril Ramaphosa also committed to diplomatic discussions with Trump and his representatives in an attempt to diffuse the situation.?
- The following is from Business Day and reminds us that Trump induced currency market shocks should be expected between now and late January:? At the weekend?Trump announced?that he would impose “100% tariffs” on imports from BRICS countries, ?effectively blocking them from US trading, if they proceeded with plans to introduce their own currency and move away from the Dollar. “Fears over trade wars, which characterised Trump’s first term on retaliations over US-driven protectionist measures, have resurfaced,” said Investec chief economist Annabel Bishop. “As January 20 approaches next year, the date the US president-elect takes over as president, markets are likely to continue to be affected by Trump’s statements on various issues, and in turn the Rand by the Dollar exchange rate.”
- The second source of pain for us yesterday was a plunging Euro which in turn pushed the Dollar Index higher.? France was the culprit here as their left-wing and right-wing parties submitted motions of no-confidence against Prime Minister Michel Barnier while verbally committing to voting with each other on this matter.? There is some debate as to whether these threats are just posturing, but with the no-confidence vote possibly going ahead as soon as tomorrow that has thrown a cloud of uncertainty around French politics with the inevitable knock-on effect of pulling the Euro lower.?
- The final challenge for the Rand yesterday was yet more robust US market data which resulted in Dollar strength as the prospects for a FED rate cut on the 18th of December diminished slightly.? The market will have one eye on today’s jobs openings report, which if it increases from 7.4m that could give a further boost to the Dollar, and tomorrow’s speech by Jerome Powell will also be closely watched, but the week’s main event comes on Friday with the monthly US payrolls report.? Expectations are for 195?000 new jobs in November and any large deviations from this number will move the currency market.?
- Local market data today sees our Q3 GDP report at 11:30.? ?
- Possible USD mid rate trading ranges in the Rand today are R18.05 and R18.35.
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