Forex Market Report

July 2021 is in the history books and the month will be forever remembered as the time when mass looting and destruction flared up in SA with ordinary citizens all that stood in the way between anarchy and the protection of private property. The Rand lost ground in the process but a net 35c slide over the month is admirable all things considered. 

Market News

• We may have lost ground over July, but a bout of Dollar weakness last week helped lessen the damage. Friday saw marginal Dollar strength return but we closed the session at R14.60 after opening at R14.86 on Monday which is a decent gain over the week. 
• Things could have been a lot better for the Rand had the Dollar’s safe haven status not saved it in Friday’s session, this after the Dollar Index was sent spiralling earlier in the week. Wednesday night delivered a much more cautious tone from FED Chair, Jerome Powell than the market was expecting, and with the Dollar Index falling to 91.77 that helped the Rand strengthen all the way to R14.53. But escalating COVID concerns coupled with new FED speak as well as traders positioning themselves for August saw the Dollar catch a bid late in the week and erase some of our gains. 
• The FED speak on Friday was mixed but unfortunately for the Rand it was James Bullard’s comments that caught most of the headlines. Earlier in the day FED member Lael Brainard had echoed Jerome Powell in saying that “employment still has some distance to go” before tapering their asset purchasing program would make sense.  But this was in stark contrast to Bullard who later said that tapering should start soon, and that the FED should implement cuts to their $120bn purchases “fairly rapidly” so as to end the program in early 2022 which paves the way for an interest rate hike later next year if needed. 
• Layered on top of Bullard’s comments were escalating COVID concerns as well as traders adopting a cautious mood ahead of August which is traditionally a volatile month and the Dollar advanced at the expense of the Rand. 
• The following is from Reuters:  The Dollar rose on Friday along with other safe haven currencies as stocks fell and as upbeat US economic data helped reverse some of the losses from earlier this week. “We’re at the end of the month and August tends to be the cruellest month for the financial markets on a seasonal basis, on a 10-year basis, it’s the weakest month,” said Kathy Lien, managing director at BK Asset Management. “So with the Delta variant as well as the uncertainties around China, investors are getting nervous and I think they’re worried about a more durable correction in stocks and so you’re beginning to see the Dollar catch a safe haven bid.”
• After a quiet week on the local front, we get more activity this week with July’s new vehicle sales, manufacturing PMI, services PMI and our foreign exchange reserves over the next 5 days. These will be the first data sets to include the impact of last month’s unrest so hopefully they show only limited damage and do not translate into Rand weakness. Internationally all eyes will be on the monthly US jobs data on Friday afternoon.   
• Local market data today sees our new vehicle sales at 2:30pm. 
• Possible USD mid-rate trading ranges in the Rand today are R14.50 and R14.80.  

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