Forex Report – 29 November 2018

At times it is frustrating being an emerging market currency that is at the mercy of the developed world, but on days like yesterday we are reminded of the benefits.

These are the mid rates as at 8:15 today:

USD = 13.75

GBP = 17.65

EUR = 15.65

AUD = 10.06

NZD = 9.45

Brent Crude = $59.25 per barrel

 

Market News

 

  • The Rand has been flirting with a move back above R14.00 to the Dollar and yesterday was no different.  We opened at R13.91 to the Dollar and moved to R13.97 but fortunately Jerome Powell sent us surging back to R13.75 in a matter of minutes.
  • Once again our local market data surprised to the downside which put pressure on the Rand early on.  On Tuesday our business confidence index dropped when it was forecast to rise, and then yesterday our consumer confidence index fell like a stone.  A drop from 22 points to 17 was forecast so the actual number of 7 points was yet another shock, and would have sent the Rand up to R13.97.
  • But local news was quickly overshadowed by developments in the US where FED Chair Jerome Powell delivered his hotly anticipated address at the New York Economic Club.  Powell has been widely criticised for his speech in October where he said that the FED was “a long way off” the neutral US interest rate, and in so doing he implied an aggressive hiking path ahead which strengthened the Dollar while decimating equities and emerging market currencies.  But yesterday he back tracked by saying that the FED is now “just below” the neutral rate which suggests that a pause in rate hikes is imminent.  US 10 year bonds plunged to 3.01% and the Dollar was immediately knocked back sending our exchange rate to R13.75.
  • The following is from Reuters:  Powell’s dovish remarks took the currency markets by surprise as he noted that the policy rate is now “just below” the broad range of estimates of neutral, which in September was 2.5% to 3.5%. “Powell’s comments were read as too hawkish back in October… to some extent his overnight comments have neutralised that,” said Rodrigo Catril, senior currency strategist at NAB. “The question now is just how much more dovish markets can get in terms of rate hike expectations,” he said, adding that investors “are now pricing in a December rate hike and only one more rate hike in 2019.”
  • The action doesn’t stop there as this evening we have minutes from the most recent FED meeting, and any commentary around a slower than expected rate hiking path will definitely hurt the Dollar and improve our exchange rate.  And once the FED minutes are out the way the market will turn its full attention to the Trump and Xi meeting on Saturday.  It’s safe to assume that local developments will have zero effect on the Rand while these heavy hitting international events unfold.
  • Local market data today sees our October producer inflation at 11:30 which is forecast to tick up from 6.2% to 6.3%.  This will have little effect on the Rand as international headlines dominate.
  • Possible USD mid rate trading ranges in the Rand today are R13.60 and R13.90.

 

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