The Rand has been hitting the headlines for all the wrong reasons of late, and we did see the Rand touch a new all-time level, with the Rand touching R19.50 at its height today. The Rand did have some reprieve and is currently trading at R19.3000 against the US dollar. With headlines currently in focus, it only takes a negative headline to see the Rand break higher again, and the world now has its magnifying glass on the Rand due to the allegations of supplying munitions to Russia. All the indications show that the Rand is massively oversold, but that has gone out the window in the short term until the dust has settled on the current issues facing the Rand.

It will be interesting to see the course of action that the SARB and Government will take to calm markets and give some confidence back to the Rand and the local market. We have seen at the back end of the day that the US dollar is running stronger, which has caused the Rand to trade back above R19.3000. The EURUSD is currently trading below 1.0900 at 1.0872. The Rand will struggle to break lower should the US dollar continue strengthening.

The report that SA has been arming Russia has been the final nail in the coffin for the ZAR today, pushing the USD-ZAR to near-record highs. The USD-ZAR intraday high stood at R19.33, marking a week-to-date loss of more than 5% for the rand against the USD. If the accusations are true and hold water, sanctions on SA become a real possibility.

George Glynos from ETM takes us through all the local factors that are hampering the rand currently, highlighting the problems at Eskom.

#Eskom

Rand Update

The rand is trading back towards the middle of our wider range, currently floating just above the R18.30 handle. Risk sentiment remains unfavorable for EMs, with most currencies unmoved on a lackluster day. Focus is shifting towards the US inflation print on Wednesday, with inflation expected to ease to 5.5% in April. That said, the dollar is holding its ground against the euro and the pound.

Commodity Sector rebounds

The recent turmoil in the commodity space has seen some reprieve today, with oil prices up over 1.5% on the back of expected OPEC+ production cuts. Gold is stabilizing above the $2,020 mark as recession fears continue to ring in our ears, and risk-off is still visible ahead of the US inflation print. Other metals have also rebounded, with palladium trading back above $1,560 and platinum trading 1.8% higher on the day, as there seems to be ETF buying.

#TreasuryONE #Inflation #OilPrice

US non-Farm Payrolls hurt EM

US non-farm payrolls surprised on the top side once again, coming out at 253,000 versus the 185,000 expected. Unemployment in the US fell to 3.4% in April from 3.5% a month prior. Average hourly earnings are also up. Treasury yields are also rising as interest rates could stay higher longer. We have seen the US dollar on the front foot, with the greenback trading below the 1.1000 level after the release of the number, and this has caused the Rand to weaken to within sight of the R18.5000 level. We have seen other EMs reversing some of their losses after the initial non-farm knee-jerk, but the Rand is lagging the pack again. We have also seen Gold lose a lot of its shine, with the Gold losing over 2% after the non-farm number, the metal trading at $2,000 per ounce after trading at $ 2,070 yesterday.

The cat is now among the pigeons with this number, as we have not seen any weakness in the non-farm data. This has also given the belief that the US economy will not go into recession and can live with higher interest rates for longer. We have also seen that Brent Crude Prices have surged after the number as a strong US economy will be good for oil demand. Next week we have the US inflation number, which could either confirm the belief that the non-farm numbers created or confuse the market.

#Recession #InterestRates #BrentCrude #Inflation #TreasuryONE

ECB follows Fed

The ECB followed in the footsteps of the FOMC last night by hiking 25bps earlier today. The ECB commented that they are not yet close to pausing interest rate hikes and are closely following inflation and pressures on the financial system. The gold price continued to rally during the day, with the yellow metal testing $2,070. The impact of tightening monetary policies and global recession fears backdrop have seen other commodities like Oil drop further and could continue to pressure prices in the coming weeks.

Rand Update

Locally the rand is still finding it tough to show any signs of a recovery back to R18.00 and below. We have seen most emerging market currencies trading sideways for most of the day, except Brazil, which is under pressure after leaving interest rates unchanged overnight. Tomorrow’s Non-Farm Payrolls print will be closely watched as always, where unemployment is expected to rise to 3.6%. Job numbers have been mixed this week, with ADP employment numbers surprising to the upside while JOLTs and Weekly Jobless claims printed lower.

#Inflation #InterestRate #EmergingMarkets

Oil continues to fall

Oil is down for a third straight day, with WTI oil below $70 a barrel. The prospect of the US recession and the spillover effects worldwide is curbing oil demand. OPEC+ members will loom to cut supply, and with inventories in the US falling by less than expected, will this halt the slide?

All eyes on the US Fed

Will Fed Chair Jerome Powell speak dovish or hawkish after the interest rate announcement is key this evening? The market is fully expecting the Fed to hike by 25bps. ADP job numbers came out better than expected today as there was a spur in private-sector hiring, although at slower pay growth. The slower pay growth could help tame inflation. The Fed will look at this after the JOLTS number disappointed yesterday to look at the labor market as still buoyant.

USDZAR recovering yesterday’s losses

The USDZAR is trading back at levels where we opened up yesterday and could rally this evening after the Fed interest rate. Still stuck in the R18.00 to R18.50 range and currently sitting at the pivotal R18.25 level, the rand could go either way this evening.

#OilPrice #ZAR #InterestRate #Fed #JeromePowell

Risk-off ahead of the May FOMC meeting?

JOLTS data came out under expectations for the second month in a row. It shows that job openings are declining and now sits at the lowest level in 2 years, indicating that the US labor market is cooling. The US equity markets are under pressure on the back of this. We are seeing more risk-off creeping into the market, with the May FOMC meeting starting tonight. Markets have fully priced in a 25bps hike, but the focus will purely be on the commentary post the meeting. Gold is also trading up over 1% on the day as its safe haven status comes into play as recession fears grip the market. The dollar is currently trading in green against most currencies on the back of the JOLTS data and tomorrow's rate hike. The rand is testing the upper end of the R18.00/R18.50 range.

Oil prices fall sharply

Both Brent Crude and WTI have fallen over 3% today as weak Chinese economic data, the expectation of further monetary tightening by both the FOMC and the ECB this week, and the fact that Iran and Russia continue to find buyers of their crude. We have recently learned that OPEC+ countries have cut production, but the factors we have mentioned currently outweigh the lower output. Brent Crude is trading back at levels we saw in late March and is now quoted at $76.57.

#FOMC #OilPrice #MonetaryPolicy #ECB #CentralBanks

The Rand and other currencies traded sideways for most of the day, with the Rand trading in a 10-cent range. We had a little flurry of activity after the PCE inflation release, but the action was quelled quickly as the number came out as expected (4.6%). The US dollar has been trading around the 1.1000 level for most of the day, and we believe markets will continue to trade in a sideways fashion, at least until the FOMC meeting next week. One thing to keep an eye on is the banking crisis in the US rearing its head again with rumours that First Republic Bank is in a little bit of strife. Another factor that could impact the Rand is the thin liquidity of Monday being a public holiday, but should no adverse events happen on the weekend, the status quo should remain.

#ZAR #Inflation #FinancialMarkets #FinancialPodcast #USBankingCrisis

With renewed questions about the banking sector in the US and risk-off regarding the recession talk in the market, we have seen the market unsure of what can happen next, and the market has been trading erratically on the back of that. Just how erratic the market has been, we have seen the US dollar almost touching the 1.1100 level against the Euro, but the Rand and some other emerging markets have been under pressure. We have also seen Gold on the front foot. Generally, in a risk-off rally, we see Gold and the US dollar move in tandem, but not this time. The Rand also took a slide today, and at one stage, the Rand was trading at R18.45 against the US dollar. Whether the weakness is down to position squaring before the long weekend can be a possibility, and the truth will only be revealed next week.

We could be in for some volatility, especially in the low liquidity conditions of the next few days, with the US releasing GDP and PCE data. This could mean that Rand could be at a very different level when we walk into the office either on Friday or next week Tuesday. We will not rule out a test of the top side of the range at R18.50, as risk sentiment is firmly against the Rand at the moment.

#ZAR #FinancialMarkets #FinancialPodcast #TreasuryONE #Recession