Wow, now that was a rollercoaster week of note, with the Rand showing both vulnerability and vigour, as it swung dramatically against the US Dollar...

...from hitting its weakest level in 3 months.

...to roaring back to end the week on a positive note.

A week of mixed fortunes saw the Rand ride an eventful week of local policy shifts and global market tremors.

With Transnet's latest developments and key central bank decisions setting the pace, together with some significant developments in the Middle East and the US, the Rand's journey was anything but dull, keeping all and sundry firmly on their toes...

...and reminding us once again of the intricate dance between local developments and global influences.

So, let's get into it - and share some of the details.

Key Moments (22-26 January 2024)

Some highlights from the past week were the following:

• The Logistics Shuffle: The logistics sectors got a positive jolt with the planned shift in cargo transportation from road to rail...about time!
• Chilled Vibes in Interest Rates: The SARB and ECB played it cool, keeping rates steady, saying, 'Let's not rock the boat just yet.'
• Israel Stop Flights Post ICJ Ruling: The ICJ's ruling against Israel has implications for SA tourist trade and economy.
  The week started with the Rand dallying around R19/$ in early morning trade...

...but in no time was on a one-way trip - and continued that way all day...

...as the USD/ZAR pushed to hit R19.21/$ - its worst level in 3 months.

This came as investors held their breath ahead of the Reserve Bank's and the ECB's interest rate decisions later in the week. But just as it seemed that all was lost, the local currency did an about-turn on Tuesday, roaring back to test R19/$ in mid-afternoon trade to gain back almost all that it had lost on Monday...

...and this against a background of a strengthening Dollar, which had pushed up to new monthly highs.

Pretty impressive!

And then, as the Dollar weakened on Wednesday, the Rand picked up some more momentum, plunging through the psychological R19/$ barrier to test the mid R19.80s.

Some interesting developments on the domestic front was the government's Freight Road to Rail Migration Plan to address the severe issues in the logistics sector, with a series of intervention aimed at attracting freight back to South Africa's struggling rail system.

About time, too!

Transnet's rail system was once the freight transportation medium of choice for many sectors of the economy - until mismanagement, corruption and lack of maintenance brought it to a virtual standstill...

...some positive news - but it remains to be seen how much this bears fruit.

Thursday morning dawned with the Rand sitting around R18.90/$ - and the day was marked by a flurry of news to digest - on the economic and the geopolitical fronts.

On the central banking front, there were two interest rate decisions:...

• SARB's Monetary Policy Committee decided to keep interest rates unchanged at 8.25%, with inflation concerns still in the air, they signalled a cautious approach as they attempt to
  balancing economic stability with growth needs.
• Europe's ECB also followed suit, keeping its rates at current levels, despite a declining inflationary environment.

And then came the ICJ's ruling on the emergency measures requested by South Africa in its genocide case Israel's actions in Gaza.

The Court ordered Israel to take measures to prevent acts of genocide in Gaza, but stopped short of ordering a ceasefire.

There will no doubt be implications of this felt in international relations going forward, but one immediate one which will impact on tourism and trade was Israel's EL Al suspending its South Africa route at the end of March, citing a steep drop in demand following South Africa's bringing the case against Israel.

As for the Rand, strangely the local unit hardly reacted to all this news on Thursday as it seemed stuck in a R18.80-R18.90 range...

...almost as if this was what the market was expecting anyway.

In other news...

• Things seem to be really heating up in Texas, with the standoff between the Lone Star State and the Biden administration over the border chaos.

  With over 4 million illegal crossings at the Texas border since January 2021 and the Biden's administration refusing to enforce the immigration laws, Gov. Greg Abbott last year took matters into the State's hands by placing razor wire at the main crossing area to deter migrants, which has led to a lawsuit against them by the Biden administration.

  

• Last Monday, things escalated when the Supreme Court ruled the Fed border agents could cut the wire while their lawsuit against Texas plays out...

  ...but Gov. Abbott stood his ground and deployed National Guard troops to the area, declaring that Texas was under an "invasion" and that the executive branch had a “constitutional duty to enforce” federal laws that protect states, but instead was violating those laws.

  With 25 Republican governors rallying behind Abbott, and Donald Trump urging the other states to send National Guard troops to assist Texas, the tense situation is fast becoming a constitutional crisis and a powder keg that has not been seen since the US civil war...

  United States...or Dis-United States?

On Friday, the Rand opened in SA trade in the lower R18.80s, before spiking up to hit R18/95/$...

...and then reversing sharply to break lower, punching down to hit R18.73/$...

...before ending the week just under R18.80. All-in-all, a pretty impressive performance after such a turbulent week!

And that was the wrap on an intriguing week!

The Week Ahead (29 January - 2 February 2024 )

Can you believe it, we have already gobbled up January!

And an eventful few weeks it has been too - in many respects.

And this week is not looking any different. Here's what we'll be keeping our eyes on for potential market triggers the next five days:

• EU: GDP, Retail Sales, Inflation
• UK: BoE Interest Rate Dec
• US: Interest Rate Decision, Non-Fram Payrolls

Bottomline: Expect more turbulence this week with the above events as well as those unexpected gusts that could sway the Rand's course...

...and looking further out, expect a bumpy ride ahead as we head into a year of elections and increasing tensions globally.

What does this mean for the Rand?

And if you are looking for some direction, we are looking at some key levels in our forecasting system to give us some pointers for the weeks and months ahead...

...helping us and our clients to keep one step ahead of the market.

As we said last week, flying blind can be costly in this market - you need to fly by instruments, not gut feel!

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.

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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.

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To your success~

James Paynter

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