Rand is ending the week on the front foot

After the week the Rand had, we have seen the Rand ending the week on the front foot. The Rand is under pressure from local factors and a stronger US dollar, and we did see the Rand reach R18.28 during trade today. The US dollar was within eye-sight of the 1.0600 level but has since retreated towards 1.0650, giving Rand a bit of respite. The fact that the US market is out of action next week Monday probably helped the move lower as market players are squaring off positions. Next week we have the South African budget to look forward to, which could impact the Rand movements.  

Commodities under pressure

The commodity market is a sea of red today, with all the major commodities losing ground, with Brent Crude the commodity taking the most strain and trading at $82.50 a barrel. Gold has lost more than $130 in the past couple of weeks and is currently trading at $1,826 per ounce. With the US dollar on the front foot, we expect commodities to remain under pressure volatility and will be the name of the game in the future.

#ZAR #FinancialMarkets #ExchangeRateRisk #SouthAfrica

Dollar climbs on hawkish Fed remarks

The PPI data was decidedly unfriendly to the disinflationary narrative. It came out 0.7% month-on-month, up from -0.2% in December and ahead of forecasts of 0.4%, not only quite a bit higher than expected across all aggregates last month, but prior data was revised up as well. Treasury yields are rising fast after the Cleveland Fed's Loretta Mester said she saw a compelling case for a 50-bp rate hike at the February meeting. Mester also said the risk for inflation is to the upside and that the Fed may not achieve its 2% target until 2025. The dollar and treasury yields are rallying after the comments. 

Rand continues to struggle

The rand remains on the back foot, and the hawkish comments did not help the cause. USD/ZAR is trading up around R18.20 currently, and we do think a lot of bad news is currently baked into the local currency. 

Gold under pressure because of higher yields

Gold and other commodities are under pressure as higher yields in the US attract flows, and gold's safe haven status wanes. Recession fears that still exist are detrimental for palladium and platinum currently. Copper is also down after a big rally earlier in the year on the China reopening narrative. Everything feels very similar to where we were in Nov last year. The Fed and the US economic data will remain key in the short term.

#GoldPrice #FinancialMarkets #ZAR #SouthAfrica

Strong US numbers continue

The list of US economic data that surprise to the topside continues, as Retail Sales for January print higher than expected. The market’s reaction on the back of the number was bullish for the dollar, with the greenback currently trading below 1.20 against the pound and at 1.0660 against the euro. The dollar index is touching the 1.04 mark for the first time since November 2022. 

Rand Update

Locally there has not been much reaction with local data releases, with local retail sales being a second-tier number and CPI printed in line with expectations. We continue to track any moves in the dollar, with the risk premium built into the rand due to local issues yet to phase out. The rand closes the day above the R18.00 handle, as we remain stuck in the R17.80 to R18.10 range for now, but the currency does feel overwhelmingly overstretched at the current levels. 

Commodities under pressure

Palladium is leading the way for commodities to trade on the back foot, losing a massive 3.5% on the day. Palladium has been under pressure recently due to a slowdown in demand for its use in automotive catalytic converters, and the announcement by the European Parliament to ban the sale of non-electric vehicles from 2035 has hammered the metal further today, trading at $1,440. Other metals have also been under pressure, with gold and platinum losing just over 1%.

#ZAR #Economy #FinancialMarkets

Risk off and Moody’s woes

The rand tracked back above the R18.00 handle today, the first time since rumors emerged for the Phala Phala saga back in November. Continued risk-off sentiment, a stronger dollar, and a warning from Moody’s over their concern about the potential impact on GDP from load-shedding have been the catalyst for the rand’s performance today. Looking at other EM currencies, the inherent risk built into the rand over load-shedding does seem to be mostly priced in, with the rand tracking a similar pattern to its peers in the past few sessions. Although we are still weaker than most other currencies, we have traded back to R17.90 this afternoon.

US CPI likely the key

Anticipation for January’s CPI print has built up nicely over the past few sessions as markets started betting on the Fed to have more room to hike rates. Tomorrow’s print could speak justice to the recent dollar strength if inflation exceeds the 6.2% year-on-year expectation, while a softer number could provide some improved risk sentiment for the rand. The dollar has traded softer during the afternoon, currently quoted at 1.07 and 1.21 versus the Euro and Pound, complementing the move we see in the rand back to its opening levels.

#PhalaPhala #Moodys #GDP #LoadShedding #Eskom #CPI

EM's under pressure

The Rand and its EM peers are under renewed pressure, with all EM currencies in the red for the day. The move in the US dollar today caused EM's to slide as the sentiment heading into the weekend turned decidedly negative. The US dollar is currently trading at 1.0693, breaking below the 1.0700 level and quite a move from the 1.0780's where we traded yesterday. The Rand punched through the R17.90 level very briefly but has since settled around the R17.85 mark. Markets will turn their attention to the CPI numbers next week, and we could see fresh momentum in the US dollar, which will decide the direction of other currencies.

Gold only confirms the move into the US dollar

Gold was trading at a low of $1,850 at one stage this morning but has recovered a little to trade at $1,865 currently. It was not a million years ago when Gold traded well above the $1,900 level, and the move into the US dollar has caused Gold to lose some of its shine. Brent Crude is trading stronger today and is currently trading at $ 85.47 per barrel.

#GoldPrice #EmergingMarkets #Markets #CPI #TreasuryONE

Softer dollar boosts rand before SONA

The dollar has softened during the course of the day, with the rand trading back around the R17.65 handle at the moment. Our local currency looked shaky during the early morning hours after it opened just below the R17.80 mark, but a softer dollar led to the rand grinding lower ahead of tonight’s SONA address. The euro and pound are both 0.8% stronger for the day, currently trading at 1.0780 and 1.2185 against the dollar, respectively.

Other markets

US equities have followed the Eastern markets and opened up stronger, with the S&P500 and Dow Jones both up 0.5%. This positive sentiment towards equities complements the risk-on move we have seen in EM’s today, as most EM currencies are trading on the front foot. Treasury Yields have dipped after the weekly US Jobless claims release, with the print slightly contracting the recent payroll numbers that caused the dollar to surge stronger. Gold is currently flat for the day, trading at $1,882, while other PGMs are slightly softer. 

#SONA #CurrencyMarkets #ZAR #Equities

Rand is on a slippery slope

The Rand rode a little bit of a rollercoaster in the last 24 hours, as the Rand dipped all the way to R17.45 during Fed Chair Powell's speech but soon popped back up to R17.60. Today the Rand started off the day around R17.50 but has since lost some ground and is currently trading at R17.80. Pinpointing the exact cause of the Rand weakness has been a bit difficult as we have seen EM selling off a bit, and we have a stronger US dollar, but it is still being determined why the Rand ran to the extent it has. We also have to factor in the possible market nervousness before the State of the Nation Address tomorrow by President Ramaphosa. At the moment, the Rand looks somewhat vulnerable. It would not be a surprise if the Rand tests the R17.90 level, but with little justification for the Rand to weaken as much as shift recovery could be on the cards if the negative sentiment is unfounded. The US dollar is stronger after Fed member William's comments about the US economy and mainly focusing on the resilient nature of the economy. The US dollar is currently trading at 1.0720 against the Euro. 

Commodities are a mixed bag

We have seen Gold riding a bit of a rollercoaster today, with the price dropping by $10 in the last half an hour with Fed Speaker Willams stating that demand is still strong in the US economy despite tightening monetary policy. We have seen Gold trading at $1,870 after touching a high of $1,886 in earlier trade. Brent Crude is slightly higher at $ 84.60.

#Inflation #InterestRate #EmergingMarkets #ZAR #Economy

Rand trading in a range

There has been a fair amount of risk-premium built into the rand over the past few days, and After three straight sessions of rand selling, we look set to post a green day at the moment. The local currency traded in a relatively narrow 10-cent range for the day and looks intent to end the day close to the R17.60 handle.

The dollar marches on

The dollar has pushed forward against its major peers, trading 0.3% stronger against the euro and pound. We have Jerome Powell speaking tonight, and markets will be anticipating any hints from Jerome Powell on the Fed’s economic outlook. US equities are softer, while Treasury Yields are slightly up, as markets are slightly cautious ahead of his speech. Palladium has bounced back from this week’s lows and is trading 2.5% higher for the day at $1,645. Gold, platinum, and Copper are relatively mixed and haven’t moved much on the day. 

#ZAR #EconomicOutlook #CommodityPrice #CurrencyMarkets

Risk-off still in evidence

Today we have seen a bit of follow-through from Friday's risk-off sentiment as the Rand reacted to a stronger US dollar. The Rand started the day around the R17.45 level but has weakened past the crucial R17.50 level and is currently trading at R17.60 against the US dollar. Similarly, the US dollar has strengthened back to 1.0750 against the Euro, and it is not too long ago that the US dollar was trading at 1.0950. With a host of Fed speakers speaking this week, we expect the market to listen very closely to the tone of their speeches to get an inkling of what the Fed is thinking. 

Commodities under pressure

The stronger US dollar has caused a few ruffled feathers in the commodity space, with Gold now trading comfortably below the $1,900 level at $1,872 per ounce. Not long ago, the yellow metal traded northwards for $1,950 per ounce. Palladium has been the biggest loser for the day, with the metal trading at $1,570 per ounce. Brent Crude has failed to break the $90 barrier in the last couple of weeks, has slid toward $80 per barrel, and is currently trading at $81 per barrel.

#ExchangeRate #FinancialMarkets #Currency #gold 

Jobs report surprise

The US non-farm payroll data blew expectations out of the water, coming out at 517,000 jobs versus 188,000. It seems too good to be true and is, with the gain is primarily due to seasonal factors and revisions to past data. These revisions include updating the population controls – which would have the mechanical effect of boosting the labour force – and updating seasonal factors, which could distort the January non-farm payroll number. For example, the non-seasonally adjusted non-farm payroll change in January is actually -2.5 million. The unemployment rate is at cyclical low at 3.4%, with labour force participation increasing, but due to the change in population estimates probably. It’s quite funny as there is a lot of S&P500 companies announcing job cuts in the coming months. The narrative that sees the Fed stopping its rate hike train early and then adding two cuts to boot in 2023 has almost been put to rest with this print, and that is how the market is currently interpreting it. The market is now fully pricing another 25bps hike in interest rates in March, which will take the Fed funds to 5%. That supports the Fed’s view of holding fed funds through 2023 at 5.25%. Treasury yields in the US jumped on the release, with the 10Y back above 3.50% and 2Y at 4.25%.

Gold under pressure

Gold has been a standout loser since yesterday, topping around $1,958 and now trading back at $1,881. The fact that interest rates will remain higher for longer it seems is putting the pressure on gold. Other precious metals are also down with platinum flirting with the $1,000 level and palladium 2.5% weaker at $1,622.

Dollar firmly on the front foot

 The dollar is having its best week in more than a month. It is rallying against most currencies and the rand is suffering with the rest. The ISM service index also came out better than expected at 55.2 vs 49.2 expected. This is the biggest monthly gain since June 2020 and aids the dollar rally. USDZAR traded briefly below R17.00 yesterday but has lost 2% since then and currently trades at R17.38. The rand is still within the broader R16.80 to R17.40 range, as we have mentioned for the past month, and we will need a strong catalyst somewhere to break out of this range. We do think that the rand will come back to more reasonable levels after the market digests the jobs report.

#GoldPrice #CommodityPriceRisk #USdollar