The Rand resembles a pinball at the moment with us bouncing around on every little coalition rumour.? Weakness on Monday, strength on Tuesday and then weakness again on Wednesday, it’s a tiring ordeal, and one that looks set to continue for a few more days at least.? ??
These are the mid rates at 6:05 today:?
Brent Crude = $78.70 per barrel
- Not a good day for the Rand yesterday as we fell to our worst level yet in these post-election shifting sands.? Things were looking good on Tuesday as we touched R18.49 to the Dollar but we opened yesterday at R18.69 and traded progressively weaker to hit R18.98 as the day’s worst level.? We open today at R18.90 and with our rates against the other majors looking rather bleak.?
- We are no closer to knowing the composition of our next government but market friendly hopes of an ANC and DA partnership, which supported the Rand on Tuesday, started to fade yesterday when ANC spokeswoman Mahlengi Bhengu-Motsiri said that they have held talks with multiple parties, and that at this point a “government of national unity” is looking like the best option.? This brings the possibility of either the EFF or MK party, or both, having a say in the new government which, given their manifestos of nationalising banks, mines, land, etc., has put the Rand under renewed strain.?
- The following is from Bloomberg:? South African assets were among the world’s worst performers on Wednesday, after the ANC said it’s considering a government comprising several parties, rather than a tie-up with the business-friendly Democratic Alliance. The presence of EFF and the MKP in any future coalition is seen as a concern, given they favour nationalizing the central bank and swathes of companies, as well as expropriating land without compensation. "A government of national unity, which would include everyone including EFF would be seen as disappointing," said Mamokete Lijane, global markets strategist at Standard Bank Corporate and Investment Banking. "The ongoing uncertainty makes people uncomfortable."
- New headlines today will no doubt impact the Rand but our fall yesterday was exacerbated by a stronger Dollar Index which climbed from 104.20 to 104.45 thanks to developments in Canada as well as stronger than expected US market data.? The Canadian central bank, as previously telegraphed, announced a 25bps interest rate cut and became the first G7 central bank to begin their rate cutting cycle, but not only did they cut but they also said further cuts this year are likely should economic conditions continue on trend.? The Canadian Dollar fell as a result, and with it being a component of the Dollar Index that helped push the Dollar higher.?
- The Dollar itself is becoming a bit of a yo-yo when looking at its reactions to US market data.? With last Friday’s inflation report not springing any surprises and then manufacturing data on Monday coming in below forecast that had weighed on the Dollar and allowed the Rand to strengthen on Tuesday, but yesterday their monthly services report came in much stronger than forecast, jumping to a nine month high of 53.8, and in so doing reminding us that the US economy is not collapsing.? Prospects of a September rate cut diminished slightly while the Dollar advanced.?
- Canada might have been the first G7 country to cut rates but today should see the European Central Bank follow suit and this is a much bigger deal when it comes to the currency market.? The ECB’s first cut, which officially signals the end of their rate hiking era that started over two years ago, is already priced into the market, but their language around the timing of future cuts will be key when driving Euro strength or weakness.? The Rand is hoping that they push back on the need for further cuts any time soon which would support the Euro and weigh on the Dollar.?
- Local market data today sees our Q1 2024 current account at 11:00.
- Possible USD mid rate trading ranges in the Rand today are R18.75 and R19.05.
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