Forex Report – 3 May 2019

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The Rand will be hoping that the weekend comes quickly, this as the “King Dollar” continues to sweep all before it.

These are the mid rates as at 7:45 today:

USD = R14.53

GBP = R18.94

EUR = R16.23

AUD = R10.16

NZD = R9.62

Brent Crude = $72.39 per barrel

 

Market News

  • Not a good week for the Rand as we opened at R14.37 to the Dollar on Monday, enjoyed a brief run to R14.27 on Tuesday but have been stuck on the back foot since by hitting R14.57 yesterday.
  • Once again yesterday’s theme was dominated by Dollar strength.  Commentary out there suggests that the market got way ahead of itself in “predicting” a US interest rate cut and the Dollar had strayed into oversold territory as a result.  Jerome Powell quashed any such speculation on Wednesday night saying that the pull back in inflation to 1.6% was transitory, and that the FED expected inflation to continue moving towards their 2% target over time.  FED Funds Futures for a rate cut have fallen significantly from 61% on Wednesday afternoon, and the Dollar has found favour again across the investment community.
  • With the FED having steadily raised US interest rates since 2016 before pausing this year they have stolen a march on other developed markets who’s central banks remain cautious in their monetary policy.  The following excerpt from CNBC illustrates how this supports the Dollar:  The Dollar looked set to end the week with a firmer tone on Friday as markets scaled back bets on a US rate cut.  “The flow of economic data fits with most central banks taking a cautious line, fearful of downside global growth risks,” said Alan Ruskin, global head of G10 FX Strategy at Deutsche Bank.  “The USD will be helped by having a pre-existing yield advantage, with a central bank that is trying hard to send a steady policy message.”
  • US market data will steal the limelight today as focus turns to their April employment data this afternoon.  February’s tiny addition of 33 000 new jobs is partly to blame for the recent rate cut speculation but with March delivering 196 000 jobs normality was restored, and now some analysts are predicting 260 000 new jobs in April following the easing of inclement weather.  A strong new jobs print coupled with steady to positive average hourly wage growth would support the Dollar and turn the screws on the Rand just before the week closes off.  Of course weaker than expected jobs data would give the Rand some reprieve.
  • Locally the predictions for next week’s elections continue to fly, with impacts of a strong ANC victory being compared with ANC / EFF or ANC / DA coalitions.  Consensus seems that an ANC victory of 60% and above would be Rand supportive while any form of coalition would see policy uncertainty and send the Rand towards R15.00.  While this is all guess work what does seem clear is that Wednesday’s election will be one of the most tightly contested affairs in our fledgling democracy.
  • No local market data today but we wait to see what happens with the US jobs data at 2pm.
  • Possible USD mid rate trading ranges in the Rand today are R14.35 and R14.65.

 

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