With all this central bank activity now out of the way we can turn our attention to the important fact that The Sharks could win the Currie Cup tomorrow, the Springboks could win The Rugby Championship later the same day and next Tuesday is a public holiday which for some will mean an extended long weekend!!!
These are the mid rates at 6:35 today:
Brent Crude = $74.24 per barrel
- Weekends are always welcomed with open arms but the Rand is probably wishing that it can just continue on it’s recent strengthening trend rather than taking two days off.? Trade has been a little choppy given all the headlines swirling about but we managed to touch R17.37 to the Dollar yesterday, our best level since February 2023, and with risk-on sentiment flooding the global market one would assume that we’ll remain on this firm footing for a bit.?
- Jerome Powell has given the market a new word to focus on, “recalibration”, and the effects at an equity level have been impressive while also putting downward pressure on the Dollar.? Powell pulled off an incredibly difficult task in announcing an outsized 50bps interest rate cut on Wednesday without sending the market into a tailspin, and by saying recalibration, or versions thereof, on eight occasions he drove home the message that the FED is flexible enough to aggressively adjust monetary policy without needing the threat of an economic downturn to justify large cuts.? Stocks soared yesterday and the Dollar Index retreated.?
- The following from CNBC talks to the FED’s assertive and positive messaging:? “Policy had been calibrated for meaningfully higher inflation. With the inflation rate now drifting close to target, the FED can remove some of that aggressive tightening that they put into place,” said Tom Porcelli, chief US economist at PGIM Fixed Income. “It really allows him to push this narrative that this easing cycle is not about us being in recession, it is about extending the economic expansion. I think it’s a really powerful idea. It’s something we had been hoping that he would do.”
- Lower US rates coupled with risk-on sentiment has hurt the Dollar but the Rand also had to deal with the SARB’s interest rate announcement yesterday afternoon, although with all the focus on the FED it would have been very difficult to meaningfully impact the Rand’s price action.? The FED chose to front load their cutting cycle with a 50bps move but the SARB were more circumspect with a traditional 25bps cut, a move that drew some criticism given that our CPI fell to 4.4% on Wednesday while the FED had shown that it’s OK to be more aggressive without triggering panic.? But we now have a lower rate which is helpful, and the SARB will almost certainly cut again on the 21st of November so things aren’t that bad!!!
- The following is from Business Day and talks to SA now being on a path to lower rates, but the slower pace of our reductions could provide support to the Rand:? In a widely expected move, the Reserve Bank’s monetary policy committee announced a 25 basis-point cut in its benchmark repo rate on Thursday. Sustained moderation in inflation over the past few months, a marked improvement in the inflation outlook and the commencement of rate-cutting cycles by major central banks created space for the Bank to cut rates. Jee-A van der Linde, senior economist at Oxford Economics said that they expected a 25bps cut in November, followed by 25bps cuts in every quarter next year. “For now, the SARB seems uninterested in front-loading rate cuts, despite the US FED opting to do so, and is instead retaining a tight bias, which should lend further support to the Rand,” he said.
- No local market data today and nothing from the US either which hopefully means we will continue to trade on yesterday’s positive sentiment for the Rand.
- Possible USD mid rate trading ranges in the Rand today are R17.35 and R17.65.
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