“There is now a positive vibe about SA. In spite of other emerging market currencies weakening, what we have seen is the SA Rand has been strengthening. That means we have been able to flush out the bulk of the negative news embedded in SA financial asset prices.”? Very encouraging news from SARB governor Lesetja Kganyago.??
These are the mid rates at 5:45 today:
Brent Crude = $79.14 per barrel
- There were an unusually high number of moving parts in yesterday’s trade with some linked to Rand weakness while others aided our cause.? Fortunately the good outweighed the bad and we were able to claw back a small amount of lost ground from earlier in the week, this as we opened at R17.64 to the Dollar and strengthened to R17.50 by the close.??
- On the local front our market data came in stronger than expected while Lesetja Kganyago’s parliamentary briefing definitely added to the feelgood factor swirling around SA at the moment.? August’s monthly manufacturing production was forecast to contract by -1.7% but it only fell by -0.6% while the standout performer was our mining production which was forecast to contract by -0.3% but it delivered a healthy 2.9% growth.? These stats alongside Kganyago painting a decidedly rosy picture around the improving state of our economy meant that the Rand had support from local factors yesterday.??
- The following is from Business Day and suggests that further interest rate cuts are imminent which is more good news:??Reserve Bank governor Lesetja Kganyago told MPs on Thursday that SA’s economic and inflation outlook was showing several positive trends, including the considerable strengthening of the Rand against the US Dollar. “The picture [for inflation] going forward is a very positive one,” he said. The strengthening of the Rand would have a positive effect on the inflation rate, which registered 4.4% in August. “We expect the next two or three prints could have a three handle on them (presumably meaning inflation will be in the threes), and that provides policy space for us” to reduce the level of restrictiveness.
- From the US we had mixed signals from both their market data and the FED speak updates.? On the data front their September CPI reading was expected to drop from 2.5% to 2.3% at a headline level while core inflation was supposed to remain steady at 3.2%, but the actual numbers came in at 2.4% and 3.3% respectively.? Higher than expected inflation is not what the FED wants to see and implies that they might consider leaving interest rates unchanged in November so as to ensure that CPI’s downward trend remains in place.? The Dollar Index jumped to 103.17 as this news broke while the Rand fell back.? ?
- But at the same time as we got the CPI print we also got the weekly initial jobless claims number which was forecast to come in at 230?000 but jumped to 258?000.? It was quickly pointed out that hurricane Helene would have distorted this report but with the FED’s main focus being on the labour market this higher than expected claims number saw the market quickly swing back to the FED cutting by 25bps in November which brought the Dollar back down to previous levels.??
- From the FED things were equally confusing as Raphael Bostic said he would be “totally comfortable” with skipping a rate cut in November while Austan Goolsbee and John Williams said they are in favour of cutting in November and December.? Once again the market was left to try and work out which was the most likely scenario and the fact that chances of no cut have dropped from 21% to 15% suggests that things are leaning towards a 25bps cut which also helped bring the Dollar Index back down.? ?
- Local market data today sees our SACCI business confidence index which is forecast to improve from 109.1 to 110.0.
- Possible USD mid-rate trading ranges in the Rand today are R17.35 and R17.65.
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