Rand Report 31/03/2023
Good morning
In a world where central banks are looking for the offramp when it comes to monetary policy tightening our Reserve Bank just put their foot down and gunned it, and the Rand is pleasantly nursing a bit of whiplash this morning!!!
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These are the mid rates at 6:15 today:
USD = R17.81?
AUD = R11.99
GBP = R22.12
DXY = 102.14
EUR = R19.45
Brent Crude = $78.61 per barrel
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Market News:
·????????Local headlines have struggled to improve the Rand lately but not yesterday, this as the SARB’s announcement had a clear and dramatic impact on our exchange rate.?The day was already going well as we opened at R18.14 to the Dollar and strengthened to R18.03 by the afternoon session, but our interest rate announcement sent the Rand rocketing to R17.77 with us pretty much holding onto those gains since.??
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·????????Inflation around the world is coming down from its 2022 peak, although in some countries it’s proving stickier than the authorities would like.?In SA however our inflation rate ticked up at the last reading going from 6.9% to 7%, but with this being such a small increase the overwhelming consensus was that the SARB would stick to a path of 25bps rate hikes just as they had done in January.?It was a genuine surprise then when Governor Lesetja Kganyago said the voting committee was split 3/2 in favour of a 50bps hike, and just like that our policy tightening trajectory accelerated.??
·????????Nobody was trying to “out hawk” the market and speculate that the SARB would deliver a 50bps move and so this was nowhere near priced into the Rand.?But 50bps it was, and if you look at a 1 day chart of ZAR/USD the impact is obvious as we shot from R18.03 to R17.77 in an instant, and taking the Rand to its best level in 7 weeks.?The immediate question analysts are asking is does this mean that the SARB signed off with a bang and are now done hiking, or could we see local interest rates move even higher despite now sitting at a level last seen in 2009???
·????????The following is from Business Day and suggests further hikes could materialise:??The Rand broke below R18 to the dollar on Thursday, firming to a seven-week best after the SA Reserve Bank’s monetary policy committee (MPC) raised borrowing costs by more than expected. “This hike is a commitment by the SARB to try and rein in inflation and this will also provide some support for the rand,” said TreasuryONE head of market risk Wichard Cilliers. “This could well be the last hike in the cycle, but it will all depend on what the US Federal Reserve does at its next meeting.”
·????????The Rand enjoyed a very strong day in the office and we’ve held onto our gains thanks to the Dollar suffering a setback yesterday.?There were a few forces at play including fears around the recent banking crisis continuing to recede as well as German inflation data not falling by as much as forecast which propped up the Euro given that the ECB could have more work to do in fighting inflation.?The end result was the Dollar Index falling to 102.09 which would have been good for the Rand on a normal day, but great for us yesterday.
·????????The Rand is celebrating but there is a chance that things could get even better this afternoon, although if the data goes the wrong way it could also spell trouble.?2:30pm sees the US personal consumption expenditure index with PCE being the FED’s preferred measure of inflation, and if we get a decent fall from the current reading of 5.4% then the Dollar will retreat allowing the Rand to post even more gains.??
·????????Local market data today sees our balance of trade at 2pm.??
·????????Possible USD mid-rate trading ranges in the Rand today are R17.70 and R18.00.?
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