On the wires…

• US government shuts down with path to reopening uncertain.
• Trump gives Hamas ultimatum on Gaza deal.
• Madlanga Commission appoints Advocate Chaskalson as chief evidence leader.
• New youth-led protests hit Madagascar despite government’s dismissal.
• Wallabies’ record-breaking prop Slipper to retire after All Blacks test.
• Liverpool lose to Galatasaray in Champions League, Chelsea beat Mourinho’s Benfica.

Quote of the day

“Appreciation is a wonderful thing: It makes what is excellent in others belong to us as well.” – Voltaire

The indicators

Currency crackdown…

The rand had another uneventful day yesterday, despite all the noise going on in the US. The US government has gone into shutdown as of today, with no clear return date in sight. The announcement of this helped the rand yesterday, as it traded to a high of R17.32/$, after figures showed local money supply growth slowed to 6.18%, down from the previous 6.75%. However, the soaring price of gold and improved market sentiment helped it to close at R17.26/$. The positive trend continued overnight, for the rand to open at the exact same level as yesterday’s open – R17.24/$. There is scarce local data being released today, the most shocking news coming out of SA at the moment is all coming from the Madlanga Commission – it is blockbuster stuff.

The US government shutdown may lead to calm waters in today’s session. 3 major data releases were scheduled for this afternoon but are unlikely to be printed due to the shutdown. This could result in currency fluctuations being solely driven by political headlines and trading flows. There has been no announcement regarding a deadline for the shutdown, however, bond traders are betting on a sharp decrease in the US 10-year yield, which indicates they do not believe the shutdown will last a significant period of time. There are also major US employment figures scheduled to be released later this week, which should provide further insight into the Feds interest policy for the rest of the year. However, without these, making accurate predictions is going to be like flying blind in a snowstorm.

The main drivers of the rand are a weaker USD, risk-on sentiment, and the price of gold. Gold is absolutely flying, trading at $3,863 at time of writing. The combination has also boosted the JSE Top 40, which is having a great run this past week and reached an all-time high. Oil has steadied after losses in two consecutive sessions, with talk of OPEC+ fast tracking its next round of supply hikes when meeting this weekend. Bitcoin is also supported by risk-on sentiment, maintaining levels over yesterday’s session.

The state of the US government shutdown is definitely the biggest factor to keep your eye on at the moment. If they open again and we start to see data being printed, flows will increase dramatically and the currency game will well and truly be afoot.

On the radar…

Did you know?

 Charcoal is not actually coal. It is wood that is that is burned in a low-oxygen environment, which removes all water compounds.

Kind regards

Luke Rosenberg