SA Government of National Unity keeps ZAR treading water while USD surges.

USD

• Over the past week, the United States Dollar strengthened against all of the top 19 currencies we monitor. The most significant gains were against the Mexican Peso (MXN) by 3.74% and the Norwegian Krone (NOK) by 2.81%.
• The primary event last week was the substantial rise in nonfarm payrolls for May, which increased to 272,000, significantly higher than the previous 165,000 and the forecasted 151,000. Following this data release, the USD surged in late afternoon trading. However, the ISM manufacturing PMI for May fell to 48.7 from 49.2, missing the consensus and forecast of 49.6 and 50, respectively. Similarly, the JOLTs job openings in April decreased to 8.059 million from the revised 8.355 million, falling short of the consensus and forecast of around 8.34 and 8.4 million. In contrast, the ISM services PMI for May rose significantly to 53.8 from 49.4, exceeding the consensus and forecast of 50.8 and 51. Additionally, the unemployment rate slightly increased to 4% from 3.9%, aligning with the consensus but surpassing the forecast. These discrepancies can lead to volatility in the forex market as traders assess the implications for the US economy and potential Federal Reserve actions.
• This week, key US economic events that could influence the foreign exchange markets include the release of core and overall inflation rates for May, both monthly and yearly. The Federal Reserve will also announce its interest rate decision, along with FOMC economic projections and a press conference. Additionally, the producer price index (PPI) for May and the preliminary Michigan consumer sentiment for June will be released.

EUR

• Over the past week, the Euro strengthened against nine of the top 19 currencies we monitor. The most significant gains were against the (MXN) by 2.33% and the Indonesian Rupiah (IDR) by 1.95%. However, the Euro declined against the USD by 1.38% and the Swiss Franc (CHF) by 1.22%.
• The main event in the EU last week was the European Central Bank's decision to cut its key interest rate by 0.25% to 3.75%. This is the first rate cut in five years and contrasts sharply with the US, which has kept rates stable, although this could change this week. The market was not overly surprised by the ECB's decision due to clear communication beforehand.?Other data also impacted the forex?markets. The HCOB manufacturing PMI for May showed a slight improvement but remained below the neutral mark, while the services PMI stayed steady. Retail sales for April declined, contrasting with previous growth, but GDP growth for Q1 exceeded prior estimates both quarterly and yearly.
• This week, notable data releases will be closely observed, particularly the US interest rate decision and the accompanying commentary. In the EU, the release of consumer inflation expectations, industrial production figures for April (both monthly and yearly), and the balance of trade for April will be monitored.

GBP

• Over the past week, the British Pound strengthened against 13 of the top 19 currencies we monitor. The most significant gains were against the MXN by 3.07% and the NOK by 2.02%. However, it declined against the USD by 0.71% and the CHF by 0.52%.
• In the UK, markets are primarily focused on the upcoming elections and external monetary policy decisions from the US and EU. According to data, the S&P Global manufacturing PMI for May improved slightly but fell below expectations, while there was a notable decline in the services PMI from the previous month, meeting expectations. Retail sales showed a modest annual increase after a significant drop in the previous month, though they remained below forecasts. This week's UK economic releases could influence the foreign exchange markets. Key labour market data, including the unemployment rate, average earnings, and employment change for April, will be released. Additionally, GDP figures for April, including the monthly growth rate and the three-month average, will be published.
• Other important indicators include the goods trade balance (both overall and non-EU), and industrial and manufacturing production data for April. These indicators will provide insights into the UK's economic health, labour market conditions, and trade dynamics, all of which are crucial for determining the pound's performance in the forex markets.

ZAR

• Over the past week, the South African Rand strengthened against five of the top 19 currencies we monitor. The most notable gains were against the MXN by 1.97% and the Chinese Yuan (CNY) by 1.30%, while it declined against the USD by 1.89% and the CHF by 1.74%.
• In South Africa, attention is focused on the recent election and the new "Government of National Unity." Until coalitions are formed, uncertainty will persist, and the currency is likely to remain steady. On the economic front, the GDP growth rate for Q1 showed a slight quarterly contraction and a significant slowdown on an annual basis, indicating economic weakness. However, business confidence improved in Q2, rising from the previous quarter and exceeding expectations.
• This week, there are no notable data releases expected, so the currency is likely to be influenced by local political factors and changes in the global interest rate dynamic. The market remains vulnerable to heightened volatility if any new developments catch participants off guard.

AUD

• Over the past week, the Australian Dollar strengthened against seven of the top 19 currencies we monitor. The most notable gains were against the MXN by 2.36% and the NOK by 1.22%. However, it declined against the USD by 1.52% and the CHF by 1.32%.
• Recent economic data from Australia presents a mixed outlook, which could affect the foreign exchange markets. The GDP growth rate for Q1 showed minimal growth, meeting forecasts but falling below previous figures and consensus, indicating a slowing economy. On the positive side, the trade balance for April exceeded expectations, showing a significant surplus and reflecting strong export performance.
• This week, key economic data from Australia includes the NAB business confidence for May and the Westpac consumer confidence change for June. These indicators will provide insights into business sentiment and consumer outlook, which are crucial for assessing economic health and potential future spending patterns.