Good morning,
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On the wires… |
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Quote of the day |
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“Intelligence is knowing the right answer. Wisdom is knowing when to say it.” — Tim Fargo |
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The indicators |
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Currency crackdown… |
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The rand posted losses for the second consecutive session yesterday. The USD strengthened after Kevin Warsh’s confirmation hearing, where he stressed the importance of Fed policy independence (read Kyle’s comment yesterday for further context). This provided support to the USD and pushed the rand into the R16.40-42/$ range. If you were watching the rates after the local session closed, you would have noticed it reached an interday high of R16.59/$ after reports of peace talks in the Middle East stalling. President Trump then announced an extension of the ceasefire and talks, which provided some relief to the rand. Oil prices also rose on the back of the stalling of peace talks, which has kept the dollar slightly stronger than yesterday, as there is still concern that the talks will fail again and the Strait of Hormuz will be closed. The pullback from R16.59/$ was crucial for the rand, as R16.60/$ is a resistance level and if it breaches that level, opens the doors for a move to R16.80/$. If the rate goes below R16.30/$, we could see the rand strengthen back towards R16.10/$ as it has proven to be a good support level over the past week. If there are no major developments in geopolitics, expect the rand to trade within the R16.30-60/$ range, but beware it is very sensitive to global risk appetite (keep your eyes on global headlines). Another long-term factor to keep in mind is the inflation outlook for South Africa. The SARB released its latest monetary policy review, which clearly highlights an upward shift in inflation for the remainder of the year. The rise in oil prices due to the conflict in the Middle East is the main driver, with higher global commodity and energy prices leading to higher food, fuel, and transport costs for the local consumer. Local CPI is released today, but remember this is always retrospective. The SARB adjusted its inflation forecast higher for the rest of the year. It will be interesting to see if they keep rates in place or even increase rates to try and be proactive after the next NPC meetings. The Governor of the Reserve bank, Lesetja Kganyago, recently mentioned how they were slow to raise rates after Covid. Will the SARB act sooner in this case to try keep SA on the front foot? There are plenty of factors to consider when looking at pricing at the moment. Keep the current ranges and support/resistance levels in mind when looking at levels. If we approach them, keep a close eye for a clear breach through, as it could leads to a shift in the trading range.
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On the radar… |
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Did you know? |
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Polar bears fur is not white. It is transparent and pigment free with a hollow core that scatters and reflects visible light.
Luke Rosenberg
