The currency market seems to be flip-flopping on a daily basis, running towards the Dollar as a safe haven asset on one day and then selling it on concerns around interest rate differentials the next, and all of this just because of a jobs report tomorrow.? One can only imagine the nervous jitters before FED’s announcement in two weeks’ time.?
These are the mid rates at 5:55 today:
Brent Crude = $72.82 per barrel
- It looked like Tuesday’s risk-off sentiment was going to spill over into yesterday as the Rand opened at R17.99 to the Dollar and immediately broke above R18.00 to hit R18.03, not a massive fall but early weakness nonetheless.? Fortunately that proved to be the day’s worst level and we notched up steady gains before jumping to R17.81 when US data came out at 2:30pm and pushed the Dollar Index lower.?
- Tuesday’s market selloff seems to have been a storm in a teacup but it’s a clear indication of just how sensitive the market is as we gear up for the FED’s policy statement on the 18th of September.? US data came in softer than expected although the numbers weren’t bad by any stretch of the imagination, but the market panicked as if a recession had just been confirmed with stocks selling off heavily while the Dollar Index was bid up as a safe haven asset.? Things became tricky for the Rand on Tuesday afternoon and we ended up touching R18.03 early yesterday as a result.
- Fortunately the market’s ability to change its mind is second to none, and with analyst after article pointing out that besides for cooling labour stats there really isn’t any data out there conclusively pointing to a US recession things cooled off with stocks stabilising yesterday while the Dollar Index gave back some of the previous day’s gains.? Dollar weakness kicked in properly however when the US jobs openings report showed that vacancies have fallen to over a three year low, this as companies are slowing their activities and therefore not needing as many staff, and this sent the prospects of a 50bps cut up to 44% while denting the Dollar due to its implied lower yield.?
- The following from Reuters suggests that in the main the US economy is still in good shape, and as such it doesn’t justify the FED spooking the market with a 50bps cut when in fact there are no immediate growth problems that they need to fix:? “Yes, the economy isn't great, but apart from maybe the unemployment rate, there are very few indicators that point to a recession. Most of them point to sluggish growth, and we don't think the FED will do 50bps on sluggish," said Steve Englander, global head of G10 FX research at Standard Chartered.
- Recent volatility on just the smallest data miss or beat is setting things up for an interesting afternoon tomorrow.? Expectations are calling for new jobs in August to come in around 160?000 while the unemployment rate should drop from 4.3% to 4.2%, and if these forecasts are accurate then maybe we will escape with little to no drama.? The following from CNBC certainly tries to ramp up the hype should the jobs numbers not behave: ?Friday's US payrolls report could offer further clues on the timing and pace of FED rate cuts. The Dollar, which tumbled more than 2% against a basket of currencies in August, has steadied as rising volatility in global financial markets lifted demand for safer currencies.. "The USD has rebounded but is afraid to rebound any further until it gets more information," Brad Bechtel, global head of FX at Jefferies, said in a note. "After Friday's print we'll either be 100 or lower, or 104 or higher in the Dollar Index by my reckoning."
- Local market data today sees our Q2 2024 current account at 11:00.
- Possible USD mid rate trading ranges in the Rand today are R17.75 and R18.05.
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