The currency market is usually peppered with ‘critical” data points that come day after day, week after week, but this week things are strangely quiet with almost no headlines to focus on.? The problem with this is that pricing is being driven by the prevailing Dollar positive themes, but the good news is there was a welcomed bright spot yesterday which helped the Rand fade the ongoing Dollar strength.??
These are the mid rates at 5:45 today:
Brent Crude = $75.90 per barrel
- The Rand performed admirably yesterday we as notched up gains against the Dollar on a day when the Dollar Index was setting fresh 2 ? month highs.? We opened at R17.62 to the Dollar and bounced around this level for a while before managing to hit R17.50 late in the afternoon session. It’s also worth mentioning that we have just broken below R19.00 to the Euro for the first time since February 2023.??
- In the wider currency market it was more of the same yesterday with the Dollar inching higher, ostensibly driven by the two narratives that have dominated sentiment over recent trading sessions.? The first of those is that Trump is nudging ahead in the US election polls and with his policies around tariffs and tax cuts seen to be more inflationary that those of Harris this has cast doubt over how often the FED would be able to cut rates, and if the FED is not likely to cut as often as the market had been pricing then that is a tailwind for the Dollar.??
- Guesswork around the US election outcome will probably have a bigger and bigger impact on Dollar price movements as November the 5th?draws ever closer but the second source of Dollar strength looks entrenched no matter who wins, that being the impressive state of the US economy.? This week has had no headline data reports but recent releases have all underlined just how well their economy is doing, so much so that the Atlanta FED GDP tracker was pushed up to an annualised 3.4% for Q3 last week.? Even if the US elections weren’t happening the FED would still be wondering how fast they need to cut into an environment of economic strength, mainly out of fear around reigniting inflation, and this is also propping the Dollar up.??
- The following is from Reuters and talks to the US economy being a source of Dollar strength:??The greenback has risen for three straight weeks and is on track for its 15th?gain in 17 sessions as a run of positive economic data has diminished expectations about the size and speed of rate cuts from the FED, which has pushed US Treasury yields higher.??"If the data had not been strong in the US, certainly had not been strong relative to the rest of the world, there would not have been this divergence between what the FED is moving towards and what the other central banks are moving towards, which is opposite directions, at least tonally, rhetorically, and that is what is driving the Dollar higher," said Thierry Wizman, global FX and rates strategist at Macquarie in New York.
- The Dollar Index climbed to 104.10 yesterday, not that the Rand took any notice however as we ended the day comfortably below our starting rate of R17.62.? It’s difficult to pinpoint exactly why we avoided this Dollar strength but one reason could be the IMF’s significantly improved GDP forecast for SA over this year and next, news that is very welcomed for our economic recovery.? Their previous forecasts stood at just 0.2% growth in 2024 and 0.3% in 2025 but these have been pushed up to 1.1% and 1.5% respectively, still way below where we need to be but a massive improvement with scope for further revisions higher.??
- Local market data today sees our September CPI report at 10:00 and while earlier forecasts suggested no change at 4.4% Trading Economics now has the reading coming in at 4.1% which would cement another SARB interest rate cut on the 21st?of November.??
- Possible USD mid-rate trading ranges in the Rand today are R17.45 and R17.75.
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