Forex Market Report

Quattro Forex Market News
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May 27, 2020
Why Active Management Works- banner 2020.07.03 V2
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July 3, 2020

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Good morning

Hooray, we have made it to alert Level 3 of our lockdown!!! Besides for the ability to exercise any time during the day, and being able to buy your favourite tipple (queues allowing), it remains to be seen how different this will be from Level 4. But if we can start to get the economy moving again in Level 3 that will be first prize!!

These are the mid rates as at 7:40 today:

USD = 17.44
AUD = 11.74
GBP = 21.60
NZD = 10.89
EUR = 19.43
Brent Crude = $36.63 per barrel

Market News

  • The Rand managed to post a 5.6% gain against the Dollar over May which was the first strengthening month of 2020, and the best month since January 2019. We open June at R17.44 to the Dollar and indications suggest that further gains are afoot.
  • Last week was looking particularly good as we made it to R17.30 on Thursday, the best level since the virus induced selloff in late March. But when Donald Trump said he would make an official announcement on Friday to address China’s clampdown on Hong Kong the rumour mill went into overdrive sending risk assets like the Rand lower. Doomsday preppers predicted that Trump would raise tariffs, impose sanctions and withdraw the US from the recently signed Phase 1 trade deal, all of which would have severely hurt the Rand. But thankfully all he did was confirm that Hong Kong’s preferential status as an autonomous “state” would start to be unwound and while this is not great, especially for Hong Kong, it’s a much softer stance than the market feared and the Rand has strengthened this morning as a result.
  • The following is from Reuters: Riskier currencies rose against the Dollar on Monday as investors looked to positive signs from China’s coronavirus recovery and wagered on an easing in US-China tensions. US President Donald Trump made no move to impose new tariffs on China during a news conference on Friday where he outlined his response to Beijing’s tightening grip over Hong Kong. “That removed the near-term risk of any intensification of the US-China trade war,” said Ray Attrill, head of FX strategy at National Australia Bank in Sydney.
  • We will keep our eye on the Hong Kong situation but the US suddenly has a much larger issue to deal with as protests have spread countrywide following yet another police killing of an African American man last week. Curfews are being imposed while disturbing scenes of riot police clashing with protestors are flooding news outlets, and things intensified to a level that Trump was escorted to an underground bunker on Friday for a short period of time. Hopefully justice is served along with no further loss of life, but with the US economy struggling to come out of its lockdown hibernation this new source of uncertainty has been Dollar negative with the Dollar Index now down to 97.99 points.
  • Bloomberg is running an article looking at the Rand’s impressive run over May and how this could extend into June. It touches on how big US fund managers got their fingers burnt by going long on the Dollar, betting that the Rand would push past R20, and goes on to look at increasing foreign flows back into our bond market which should provide further support to the Rand. A key level of R17.24 to the Dollar is mentioned which if broken could open the door to R16.50 and below.
  • The following is from that Bloomberg article: In the context of rising US-China tensions over security legislation in Hong Kong, along with a deteriorating economic picture in South Africa, the timing of the Rand’s rebound “has been a bit surprising,” said Per Hammarlund, chief emerging markets strategist at SEB AB in Stockholm. Still, “given that the Rand and most other emerging-market currencies have some way to go before being back at levels from before the Covid-19 outbreak, the rally has enough legs to last through the end of the second quarter,” he said.
  • Local market data today sees our manufacturing PMI for May at 11:00 with a drop from 46.1 to 43 points forecast. We also get May’s new vehicle sales at 2pm but with the country still effectively in lockdown last month the vehicle sales number should remain artificially low.
  • Possible USD mid rate trading ranges in the Rand today are R17.20 and R17.60

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Quattro Forex Market News

Quattro Forex Market News

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