Rand Report 26/09/2022
Good morning
If Monday morning is feeling like a bit of a struggle and you’re in need of a pick-me-up then I suggest you look away now, the Rand is only going to add an extra layer of gloom I’m afraid.??
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These are the mid rates at 6:35 today:
USD = R18.06
AUD = R11.74
GBP = R18.97
DXY = 113.98
EUR = R17.41
Brent Crude = $85.69 per barrel
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Market News:
·????????A terrible end to last week has been followed by a shocker early session today with the Rand blowing past R18.00 to the Dollar.?The FED and the new UK government are to blame as our SARB induced gains from Thursday are already consigned to the history books.??
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·????????Lis Truss recently replaced Boris Johnson as UK Prime Minister and in doing so she has appointed new Finance Minister Kwasi Kwarteng who on Friday announced the biggest UK tax cuts since 1972.?Truss has rolled the dice saying that taxes stifle consumer spending, and therefore limit economic growth, and with Kwarteng revealing a swathe of tax cuts the market has thus far given them a firm thumbs down.?Just how the UK is going to fund government spending is the big question that needs answering, and the Pound cratered to $1.10 against the Dollar on Friday with further losses this morning taking it to $1.03, with parity the likely next move.??
·????????The Pound is a member of the Dollar Index basket of currencies and one needs only look at the Rand’s movements to see how a significantly weaker Pound has depth charged our Dollar exchange rate.?On Friday morning we sat at R17.62 to the Dollar and R19.80 to the Pound, this when the Pound / Dollar exchange rate was $1.13.?Enter Kwasi Kwarteng and his shock tax cuts and Pound / Dollar has plunged to $1.03, our Dollar exchange rate has shot up to R18.06 while our Pound rate has fallen to R18.97.?Incredible.??
·????????The following is from Reuters and talks to further Pound weakness:??"A weekend of reflection hasn't led anybody to change their opinion," said National Australia Bank's head of currency strategy, Ray Attrill in Sydney. "It's a case of shoot first and ask questions later, as far as UK assets are concerned." Gilts suffered their?heaviest selling in three decades on Friday and on Monday the Pound made a 37-year low as investors reckon planned?tax cuts will stretch government finances to the limit.
·????????The Dollar Index, which was at 111.42 on Friday morning, hit a fresh 20 year high of 114.51 in early trade today thanks to the Pound’s collapse as well as continued Dollar strength following the FED’s 75bps hike last Wednesday.?Not only did the FED hike by 75bps but they also warned of another 1.25% in total increases across their two remaining policy meetings this year, and one suspects that the Dollar will hold on to most of it’s recent gains until the market starts to question whether the FED will deliver as promised.??
·????????Locally we have a number of releases this week including the SARB’s quarterly bulletin, a Stats SA employment update, producer inflation, the September purchasing manager’s index and finally, August’s trade balance.?Given what’s happening in the UK and its impact on the Dollar Index it’s doubtful that any of our local releases will move the Rand.??
·????????No local market data today.??
·????????Possible USD mid rate trading ranges in the Rand today are R17.90 and R18.20.
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