Forex Report – 2 May 2019

CONNECT WITH JODY

Less than a week now until our general elections and still the Rand takes almost all of its direction from international factors.  Is this the calm before the storm, or is the election going to be a non-event for the Rand?  We shall see soon enough….

These are the mid rates as at 8:20 today:

USD = R14.45

GBP = R18.85

EUR = R16.19

AUD = R10.15

NZD = R9.58

Brent Crude = $72.39 per barrel

 

Market News

  • While we enjoyed a day off yesterday the Rand was put under pressure, but not because of any local developments.  Currency markets didn’t have the day off and the Rand opened yesterday at R14.29 to the Dollar and traded marginally weaker before plunging to R14.46 in the evening session.
  • All eyes were on FED Chair Jerome Powell last night as he delivered their latest monetary policy statement.  Since January the FED has been increasingly dovish by first doing an about turn on their planned interest rate hiking path and then acknowledging financial market volatility as a reason to reassess their route forward.  This had seen the Dollar lose ground with the Rand touching R13.21 immediately after the FED’s statement in February, but last night Powell cooled market sentiment for a rate cut which supported the Dollar thus pushing our exchange rate lower.
  • The following is from CNBC and shows how Powell’s announcement dampened expectations for an interest rate cut and in so doing supported the Dollar:  It only took one word from FED Chair Jerome Powell on inflation to send the markets reeling, and that word was “transitory.” “The market was pricing in this rate cut. They want a rate cut and this was basically Powell saying, ‘sorry but we’re not.’ You have gold down, the Dollar rallying and Treasuries selling off,” said Peter Boockvar, of Bleakley Advisory Group
  • With the FED effectively saying they are on an extended pause, with no need to move US interest rates in either direction, the market will now turn its attention to tomorrow’s employment data.  Inflation is once again a key focal point and so average hourly wage gains will probably move the Dollar if it comes in higher or lower than expected.
  • Turning to our local market there are various articles out there trying to predict what election outcome scenarios will do to the Rand.  One article points to historical data where the Rand has weakened in the month after every general election since 1994 (except for 2009 when we were recovering from the 2009 financial crisis) while others are saying that the Rand will strengthen if the ANC gets a majority vote thereby maintaining policy stability.  What ever happens it will definitely be interesting to see the Rand’s reaction, especially when considering the relatively stable run in the Rand has enjoyed.
  • Local market data today sees our manufacturing purchasing manager’s index at 11:00 (forecast to drop) followed by our April new vehicle sales at 2pm.
  • Possible USD mid rate trading ranges in the Rand today are R14.30 and R14.60.

 

LOOKING TO INVEST OFFSHORE?

For more information please contact me.

CONNECT WITH JODY

Jody Fabre

Tel: 031 242 5100
Cell: 084 301 7913
Whatsapp: 061 237 9571
Email: JFabre@qfg.co.za
Email: jody@jodyfabre.co.za
Website: www.jodyfabre.co.za

Quattro Offices

390 Ridge Road
Overport
Durban
4001