Week of 04 March 2024

Past Week in Review

Global economic sentiment looks mixed, aimed at geopolitical tensions and inflationary woes that plague central bankers.

The influencer of the West, the United States of America, showed that lingering inflationary pressures have impacted home buyers, with U.S. Home Sales slumping M/M for February but remains active. Additionally, the major slump in ISM manufacturing PMI and Prices contradicts the U.S. data outlook. Over in Asia, Japan's national core CPI figures printed at 2.0% vs 1.9% forecasted, leaving traders to speculate around the BoJ action to scrap the yield curve control method in the coming months. While China's deflationary pressure could create a spiral in demand for the domestic economy, the PBoC will see the need for further stimulus in the coming months. Conversely, the reduced Chinese demand could assist importing nations due to the revised prices of the domestic Chinese demand spiral.

South Africa

Fundamentally, South Africa's domestic economy is struggling, accounting for ballooning public sector wage growth and structural inefficiencies. The economy faces numerous headwinds leading up to the election. Last week, we saw vehicle sales marginally in line with the forecast, with heavy commercial vehicles supporting that growth. NAAMSA suggests that a turnaround in vehicle sales would be achieved by rate cuts later this year. But as mentioned earlier in our macro piece, we don't see the anticipated three rate cuts this year but rather one rate cut towards the end of the year. Due to the lack of economic data support, the Rand remains bound to the pressures of global macro developments.

We don't foresee any significant changes in the Rand over the near term, with a broader macro range of 18.75 to 19.40. However, the build-up to the election may benefit importers, and U.S. inflation narrative changes will support South African exporters.

Looking ahead until July for South Africa, we are concerned about inflation pressures, particularly from international oil prices and domestic rainfall patterns. These fundamental factors will heavily influence the SARB rate decision and outlook for the March MPC meeting. We will not be surprised to see a 25bps hike before they relax the monetary policy.

Hedge Analysis Snapshot

The data below emphasises hedge scenarios based on a USD50,000 invoice on a 60/40 split vs. an outright hedge.

Currency & Commodity Snapshot

Global Week Ahead

Mainly, all eyes will be on Federal Chain Jerome Powell when he testifies in front of Congress on Thursday. The U.S. economy has nuances that keep it between a rock and a hard place as it successfully tries to complete a soft landing.

The events shaping your week are as follows:

1.????? South Africa Annualised GDP (Tuesday)

2.????? U.S. ISM Non-manufacturing PMI (Tuesday)

3.????? Australia GDP (Wednesday)

4.????? Australia Retail Sales (Wednesday)

5.????? Federal Chair Powell Testimony (Wednesday)

6.????? U.S JOLTS (Wednesday)

7.????? Bank of Canada Rate decision (Wednesday)

8.????? China Trade Data (Thursday)

9.????? Euro Zone Interest Rate Decision (Thursday)

10.? U.S. Trade Data (Thursday)

11.? U.S. Non-Farm Payroll (Friday)

Blockchain and On-Chain Analytics

Delving deeper into on-chain over the past week, there is clear speculation in both directions, with FOMO of the retail investor and ETF groups acquiring the excess supply in the market. Considering the Coinbase Premium index, we have seen an uptick in North American demand for BTC.

Statistically, a two standard deviation move since January 2024 would reach all time high of BTC, while three standard deviations would price at $82,000 should volatility continue. However, based on a technical basis, BTC may consolidate above USD60,000 as we see the ADX (Average Directional Index) losing steam.

Insights by: Shiven Moodley (COO & Macro Strategist)