Welcome to our first issue of the Weekly Rand Review for April, as we pick up the pieces after the Easter long weekend.
And for the second week, the Rand managed to make some gains against the Dollar, - and this being despite the news not all being so Rand rosy.
...be it a stuttering manufacturing performance, or escalating tensions in the Middle East and Russia/Ukraine, or the surprise growth in US jobs last month...
...the Rand seemed to have a comfy ride above the choppy waters as it pushed stronger, while the US dollar lost ground.
Let's dive in and see how this all played out...
Key Moments (1-5 April 2024):
Some news highlights from the past week that caught our attention:
- SA Manufacturing Contracts: Manufacturing activity dropped back below 50 points in March...
- Middle East & Russia/NATO Tensions Escalate: As if tensions were not already at extremes, Israel upped the ante by bombing Iran's embassy in Syria. And so has
rhetoric from Russia and the US in the wake of the Crocus massacre. - US Non-Farm Payrolls Surprise: The big trigger for the month provided a surprise package with the most jobs added in 10 month, but...
The week started off with the Rand in a thin market with the Easter public holiday, with the result being that the traders that were involved, were caught out April Fools style...
...with the USD/ZAR opening in early trade around R18.85/$ and initially looking like it was pushing stronger against the greenback, but then as midday came and went, the market took off back north to test R19 to the US dollar...
...before retracing to end the day some 5 cents lower.
Tuesday dawned with the market initially caught in a tight range in the lower R18.90s, but things heated up when the SA trading desk opened, and the Rand took off, punching lower...
...testing the low from the previous day before punching lower to end the day just above R18.75 to the Dollar...
...an impressive comeback!
What made it all the more surprising, is that it came off the back of not so favourable local and international news:
- Firstly, ABSA Purchasing Manager's Index (PMI) falling back to 49.2 in March, indicating a return to contraction in the country's manufacturing activity, after a solid expansion the prior month.
- And then also, the news that Israel had bombed Iran's embassy in Syria, raising the already heightened tensions in the Middle East to the next level...
Normally, in such circumstances, this would spark a loss of appetite for emerging market currencies, but instead we saw the opposite!
for the underlying market sentiment (the real direction-driver).
Sjoe, and it was only Tuesday - and there was still plenty of the week to come!
And plenty triggers...
...with the market having all eyes next on US Fed Chair Powell's speech on Wednesday to get some hints on interest rates going forward.
In anticipation of the move, the Rand initially weakened versus the USD, testing the R18.85 resistance area, but then bounced back (once again) to punch lower...
...assisted by the Dollar Index falling after the ISM Services PMI came in at 51.4 in March, the lowest in 3 months and worse than expected, signalling weaker growth in the services sector.
And then, Powell's speech added some extra catalyst...
...as he noted that the central bank is achieving a soft landing (we are not so sure!)...
...despite evidence that higher rates have impacted the economy (yes, obviously!)...
...while he once again underscored that interest rates would only be lowered when data paints a clear picture of sustained disinflation
(well, he could get more than just that ahead...).
Again, this sort of news should have been Dollar-positive (softer landing, higher rates for longer, etc)...
...but instead it had the opposite effect, as traders pushed the Dollar lower, with the Rand riding in its wake to test the R19.65/$ level in after-hours trade.
In other news, the rhetoric is also heating up in the Russia/Ukraine conflict:
-
In the aftermath of March’s terrorist attack on the Crocus City Hall concert venue outside Moscow (which killed more than 145 persons), following capture and interrogation of the terrorists, Russian officials have not only laid the blame on Ukraine but have accused the West of involvement, and have also having recently stated that Russia is in a state of war, not just a 'special military operation'.
This has been denied by the US, but at the same time US Secretary of State Blinken stated that Ukraine would be joining NATO, which if it did happen would not only crossing be a stated red line for Putin, but would immediately draw NATO members into a conflict with Russia directly.
Not encouraging developments...
Thursday saw the momentum continue initially from the prior days, as the Rand pushed still stronger against the USD to hit R18.57...
...its best levels since mid-March!
But then it ran out of steam, and gave up 20c of ground over the balance of the day and into Friday in anticipation of the BIG data release for the month...
...US Non Farm Payrolls (NFP).
But having tested the the R18.77/$ level, the Rand managed to muster up some fight and turn things around in the hours prior to the NFP release...
...punching lower in impressive fashion to test the prior day's low - a valiant effort indeed!
But that all changed with the news that the US economy had added 303k jobs in March (versus an expected 200k) - the most in 10 months, with unemployment also dipping back to 3.8% from the prior month's 3.9%.
(as we have before, this all looks good on the surface, but how many are second and third jobs as persons struggle with higher prices and increased debt-burden?)
Anyway, this was a surprise for the market, and the Dollar had an immediate boost, with the Rand being pushed back into the R18.64-70 range, where it pretty much stayed for the rest of the day.
And with that, the Rand has managed to put in the second week of gains against the USD...
...a not too shabby performance!
And that was the wrap!
The Week Ahead (8-12 April 2024)
And before you can blink an eye, we are already into the second week of April (where do the weeks go?)
A few economic calendar events to keep eyes on this week:
- US - Inflation, FOMC Minutes
- EU - Interest Rate Decision
- UK - GDP
We are at some important junctures on the Rand at present, and will be again looking to our forecasting system to give some clues for the days, weeks and months ahead...
...this is no time to be flying by the seat of your pants...
If you are looking for some direction, our forecasting system is giving us some important pointers for the weeks and months ahead...
...helping us and our clients to keep one step ahead of the market.
to make the RIGHT decisions...and take the RIGHT action...
at the RIGHT time!
Hit the link below to get access to our latest predictions.
Until we meet again, safe trading!
To give you a little helping hand, feel free to take our Rand forecasting service for a test-drive!
This will give you access to the same charts we are to give us and our clients the likely direction of the Rand - ahead of time, enabling you to make educated and informed decision.
Simply use the link below to get access now.
This will give you access to the same charts we are to give us and our clients the likely direction of the Rand - ahead of time, enabling you to make educated and informed decision.
No charge. No card. All yours to trial for 14 days.
(You don't want to regret not having done so this time next week...)
If you have any questions or feedback, please leave them below.
To your success~
James Paynter
P.S. Worrying about how to in manage your Rand exposures this year? Email me or give me a call on (041) 373-6310 or (087) 551 2848 - we would love to help.
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