The market usually treads water this close to a major economic event and to be fair movement in the currency market wasn’t significant yesterday, but there was movement and fortunately that came in the form of Dollar weakness.??
These are the mid rates at 5:55 today:
Brent Crude = $73.12 per barrel
- The week ahead is packed with risk events but the Rand got things off to a good start as we opened at R17.68 to the Dollar went on a gentle stroll to R17.62 where we open today.? Activity levels pick up later today so hopefully we can hold onto these gains.
- The Dollar is on the back foot as we approach tomorrow’s FED policy announcement and this has allowed the Rand to post day after day of gains.? Once again it was the market’s recalibration of how big their first rate cut will be that drove sentiment, this as chances of an outsized 50bps cut had jumped from 15% last Thursday to 50% on Friday and then received another boost yesterday as it climbed to 67%.? Of course this is all just speculation, and will have no real influence on what the FED is thinking, but with US market data remaining fairly robust coupled with current and past FED members talking up the need to start cutting that has seen chances of a 50bps cut gain in popularity at the expense of the Dollar.? ?
- It’s easy to talk the trend, and often risky as surprise headlines are then able to dramatically change the landscape, but for now it looks like the Dollar could remain under pressure for the immediate future at least.? The reason for this is that the FED is both the last of the major central banks to the rate cutting party (except Japan who are hiking) and they also have the most room to cut given how high they pushed their interest rate.? The Bank of England, ECB, Bank of Canada, Swiss National Bank and many others have all started cutting and are now not expected to cut at every meeting going forward while the opposite is true for the FED, and this is a scenario that many analysts are using to justify their weaker USD call.??
- Not only do we get the FED’s decision tomorrow but we also get their latest “dot plot” update which is a prediction around policy moves over the next two to three years.? This could add to the Dollar’s woes if those projections are dovish, and the following from CNBC points to Dollar weakness tomorrow night:?The Dollar traded near its lowest levels of the year on Tuesday, on the eve of the expected start to a US easing cycle that markets are betting may begin with an outsized rate cut. “Regardless of which of 25bps or 50bps the FED goes with on Wednesday, we do think that the FED’s messaging will be ‘dovish,’” said Macquarie strategist in a note to clients. “The USD could weaken against the majors on a very dovish tone, even with a 25bp cut.”
- Tomorrow’s FED announcement is the main event by far but we kick the week off in earnest today with US retail sales for August at 2:30pm.? The health of the US consumer is of paramount importance to the health of the US economy which makes today’s reading fairly important in its own right, and with a fall from 1.0% to -0.2% expected that could spook the market and drive Dollar gains as a safe haven.? It must be pointed out however that July was supposed to come in at 0.3% but smashed this with a 1.0% gain, and so a retracement from this big beat to the upside over August should not come as a surprise.?
- Local market data today sees our Q3 consumer confidence reading at 10:00.??
- Possible USD mid-rate trading ranges in the Rand today are R17.50 and R17.80.
Foundation Fund Managers gives you the opportunity to invest in international shares which gives you direct access to owning the likes of?Google, Mastercard, Amazon, Apple, Starbucks, Adobe, Ferrari, VISA, Adidas, Microsoft?or any other company listed on the London Stock Exchange, NASDAQ or NYSE.??
We also offer local share portfolios with a bespoke selection of stocks listed on the JSE.?
For more information please contact?Brody Scott?on:
