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0081 Week 20 What we know This past week the rand traded in a narrow
range of 30 cents, with a high of 18.67 and a low of 18.37 ending the
week at USD.ZAR 18.38 to the dollar, eight cents lower than the
opening rate of 18.46. We remained mostly within our projected range
for the week only breaking the 18.60 upper bound on Wednesday for a
brief period. The Dollar closed the week on a reasonably strong
footing signalling that some Rand specific strength may be responsible
for the Rand stability. A functioning economy leading up to elections
seems to be driving some Rand strength aided by a rally off the back
of weak jobs data and unemployment figures out of the US as we
mentioned last week. We saw a consolidation due to the various
election probabilities being mostly priced into the market with only a
few weeks to go. With voting day on the 29 th of May, the market will
likely be holding its breath for results before a new trading
direction is established. The Bank of England seem to be following
suit with the US regarding interest rate cuts or rather the lack
thereof. The BoE meeting ending on Wednesday saw rates remain
unchanged at 5.25% with an optimistic outlook for cuts this summer but
we would need to see a more significant decline in inflation. On the
other side of the coin, the latest month on month GDP growth in the UK
came in at 0.4% which is higher than the forecasted 0.1%. With very
little data from the US last week the UK interest rate decision took
the spotlight. Although rates have remained unchanged, the UK seem to
be faring better that the US when it comes to battling inflation. The
UK March CPI was 3.2% year-on year, down from 3.4% in February. While
the Fed are forced to continuously push out rate cuts, the Bank of
England may have an opportunity to provide consumers at least some
breathing room in the near future. The increased likelihood of a rate
cut and general positive sentiment around South Africa has aided the
Rand in gaining some ground against the Pound dipping below the
GBP.ZAR 23.00 level.
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What others say
https://www.reuters.com/world/europe/russian-pm-proposes-new-ministers-retains-ministers-finance-economy-2024-05-11/
Reuters - Girding Russia for war, Putin gives extra duties to two top
officials " Manturov oversees the Russian defence and civilian
industry, which has surprised the United States and its European
allies by ramping up artillery production faster than the whole of the
NATO military alliance combined despite sanctions. "
https://www.dailymaverick.co.za/article/2024-05-13-nvidia-rivals-gold-as-shield-against-inflation-survey-shows/
Daily Maverick - Nvidia rivals gold as shield against inflation,
surveyshows " The response highlights the dominant role that companies
like Nvidia Corp., Amazon.com Inc., and Meta Platforms Inc. are
playing in the US financial markets as they expand their sway over
major swaths of the economy. That has allowed them to generate steady
profits, stoking rallies that are making investors confident that they
will continue to be a source of solid gains. "
https://www.cnbc.com/2024/05/13/rishi-sunak-warns-britain-is-at-a-crossroads-ahead-of-general-election.html
CNBC - Britain faces its 'most dangerous’ years in history, PM Rishi
Sunak to warn in pre-election bid " In a speech to be delivered in
central London, Sunak will say that the years ahead will be among the
most challenging in Britain’s history, with threats such as war,
migration and technology all set to intensify. " What we think Last
week we said that, “Non-Farm Payrolls and the Unemployment Rate both
disappointed, pushing the Dollar Index to its weakest level in almost
a month… we’ve been calling for soft USD data for some time, while
being proven wrong… We do now need to see more weak US data in the
coming weeks and months, which could then potentially allow the Rand
to eye the big 18.00 figure.” After weak employment data two weeks
ago and a quiet week last week, the significant news out of the US
this week consists of PPI figures on Tuesday afternoon followed by the
Fed chair, Jerome Powell, addressing the press later on Tuesday. A
poor PPI release on top of a fairly reserved forecast could aid the
ZAR in its push stronger considering last week’s underwhelming
employment release. The way forward for the Fed becomes more
challenging as they continue to extend rate cuts and the highly
anticipated “soft landing” for the US economy seems to be slipping
if the Fed is unable to get inflation under control. In the lead up to
elections here in South Africa, a lack of any significant news leaves
very little to move the markets in either direction, and we find
ourselves in a stalemate when considering how markets may move this
week. Our range for the week: 18.30 – 18.60.
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0081
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