Accountability, a vital ingredient that SA needs when fending off any repeat of the state capture disaster.? Yesterday the former chairman of the collapsed VBS Bank was sentenced to 15 years in jail for his roll in facilitating looting to the tune of R2bn.? His guilty plea, and relatively lenient sentence, is hopefully part of a wider plan to expose the many others who were involved.?
These are the mid rates at 6:35 today:
Brent Crude = $85.78 per barrel
- Sideways trade with a hint on Dollar weakness is how the week can be described thus far, and yesterday we chipped away to touch the week’s best level of R18.05 to the Dollar.? But traders have probably been sitting on the sidelines reluctant to take any sizeable positions ahead of this afternoon’s US inflation report which definitely has the potential to move the market.?
- The ebb and flow of the currency market continued yesterday with Jerome Powell’s second day in front of congress delivering very similar remarks to those from Tuesday, but unlike Tuesday when this resulted in slight Dollar strength Powell’s comments yesterday knocked the Dollar back a peg or two.? Once again he gave no specifics around when the FED might start cutting interest rates, but he confirmed that the FED need not wait until inflation is at 2% before cutting while also acknowledging that keeping rates at elevated levels poses a risk to both the economy and the labour market.? The absence of clarity around rate cuts on Tuesday was positive for the Dollar but the tone of his testimony yesterday weighed on the Dollar.?
- The following is from CNBC and suggests that prevailing trends in inflation and unemployment might be enough to usher in the first FED rate cut: “The level on inflation is still elevated relative to the Fed’s 2% target. The level on unemployment is still very low historically at 4.1%. But the trend in both is that unemployment is gradually starting to pick up and that inflation continues its downward trajectory,” said Matt Brenner, managing vice president, investments and product management at MissionSquare Retirement. “For some time the FED has been more focused on levels, and now it seems that they may be starting to tilt more towards a focus on trend. And if that’s the case, then the chances of a rate cut go up.”
- Powell’s comments were Dollar negative but a buoyant Pound also contributed to the Dollar Index falling from 105.15 to 105.01.? With UK inflation at the BoE’s 2% target the chances of their first rate cut coming in early August have been all but assured but yesterday BoE Chief Economist Huw Pill cast a little doubt on this outcome, doubt that pushed the Pound to a one month high against the Dollar while also edging our Pound exchange rate higher on a day when we gained ground on the Dollar.? Pill said that services inflation and wage growth still show “uncomfortable strength” while also describing an August rate cut as “an open question”, remarks that supported the Pound if a rate cut is no longer a foregone conclusion.? ?
- Central bank speak is all the market has had to focus on this week but that changes today when we get the June US CPI report at 2:30pm.? Last Friday saw their unemployment rate surprise with an uptick to 4.1% and forecasts are calling for a drop in the headline CPI print from 3.3% to 3.1%, a move that would further entrench the narrative that both the labour and inflation trends are headed in the right direction.? There are some analysts out there saying that these trends are already enough for the FED to start cutting later this month, but while that is a highly unlikely scenario the chances of a cut in September should improve if CPI moves down today and with any luck that should weigh on the Dollar.?
- Local market data today sees our May mining and manufacturing production stats at 11:30 and 1pm respectively.?
- Possible USD mid rate trading ranges in the Rand today are R17.95 and R18.25
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