Rand Report 14/05/2024

Good morning

Apologies to those for whom this forex report is a part of your morning ritual but today will be the last update of the week.? Normal service resumes on Monday the 20th, and with the next few days stacked with economic events I’m sure that there will be loads to recap.? ??

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These are the mid rates at 6:20 today:

USD = R18.36

AUD = R12.12

GBP = R23.06

DXY = 105.25

EUR = R19.82

Brent Crude = $83.51 per barrel

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Market News:

·???????? The chances of a bumpy ride over the next few days are definitely still there but for now the Rand is enjoying continued Dollar weakness.? We opened yesterday at R18.42 to the Dollar and traded progressively stronger to hit R18.30 in the afternoon session before closing the day at R18.35.??

·???????? Dollar weakness is plain to see on the charts and is the primary reason why we made it to R18.30 yesterday which is a whisker away from our best level of 2024, that being R18.29 where we started the year on the 2nd?of January, but local headlines could also have brought some much needed Rand strength.? Electricity Minister Kgosientsho Ramokgopa confirmed that Eskom’s energy availability factor has climbed to a three year high of 70% as a result of widespread and sustained grid maintenance programs along with a crackdown on criminal activity.? Any headline that suggests threats of load shedding are receding is good for the Rand.??

·???????? Local headlines are encouraging but this was helped by the Dollar Index falling from 105.32 to 105.09 at one point during the day which lines up with our move to R18.30 when looking at the charts.? Hopefully the market is not getting ahead of itself but with US consumer inflation having risen over the first quarter of 2024 expectations are for tomorrow’s reading to come in slightly lower, and this coupled with recent comments by Jerome Powell that the next FED move is a rate cut while various US labour reports have also come in softer of late is weighing on the Dollar.? The week gets started in earnest today with US producer inflation along with a speech by Jerome Powell, but all eyes are on tomorrow’s CPI report at 2:30pm.??

·???????? The following is from CNBC and talks to cracks in US labour data along with a possible fall in inflation readings pulling the Dollar lower:??The Dollar eased versus most major currencies on Monday amid expectations key US data this week will show a slowing pace of inflation and growth at a time European economies have surprised to the upside and could be bolstered by interest rate cuts. The economic picture is changing somewhat in the second quarter and Dollar strength could fade with weaker employment data as suggested by last week's jobless claims, said Kaspar Hense, senior BlueBay portfolio manager at RBC GAM in London. "We think the data is softening a bit, not only inflation but also the labour market."

·???????? The narrative around US rate cuts has gone through a noticeable shift in recent weeks where not long ago the market was not only questioning whether the FED would cut at all this year, but it was also starting to fret about the chances of another rate hike.? The Dollar was bolstered at the time but Powell confirming that hikes are off the table along with softer US labour data has seen expectations swing back to at least two rate cuts this year, with the first coming in September, and the Dollar going into reverse.? That has been great for the Rand, but we should remember that the year has delivered three hotter than forecast US CPI readings in a row thus far and if we get another upside surprise tomorrow then Dollar strength will burst back onto the scene.??

·???????? Reuters has released survey results showing that a larger majority of analysts now see the FED cutting twice this year, sentiment that is evidenced in a weaker Dollar, but the following excerpt from the survey reminds us that the path forward is not cut and dried:??"We had nothing but bad news on the inflation front through the first quarter, all of those inflation increases were too big to allow rate cuts," said Chris Low, chief economist at FHN Financial, who expects the FED to cut twice this year, in September and November. "For the FED to cut rates, we have to see a change in trend. One month of good news will not be enough to allow a cut, they need several months. There is a pretty significant risk they will do less than two."

·???????? Local market data today sees our Q1 2024 unemployment rate at 11:30 with our March mining production starts released at the same time.? ?

·???????? Possible USD mid-rate trading ranges in the Rand today are R18.25 and R18.55.

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