Forex Market Report

16 February 2024

Friday is here, and it brings some welcome relief.  Relief for the Rand as we move back below R19.00 to the Dollar, but also relief from the relentless late summer heat. Yesterday was close to unbearable… 

These are the mid-rates at 6:05 today:

Market News

• After Tuesday’s walloping the Rand has been steadily clawing back lost ground and fortunately US market data went our way yesterday to continue the recovery.  We made it to R18.93 in afternoon trade before sliding back to R18.96 where we open today which is marginally below Monday’s open of R19.03 meaning an unlikely gain for the week is still on the cards. 

• Tuesday’s hotter than expected US CPI report smashed the Rand and equities alike but just as we have seen over 2024 thus far the equity market has managed to brush off any bad news within a day or two and the S&P500 closed at a new record high last night while the Dow and the Nasdaq both posted gains.  A combination of risk-on sentiment around the ongoing artificial intelligence revolution along with favourable market data provided a tailwind for stocks, and the Rand benefited as a risk asset. 

• The US CPI reading was definitely this week’s primary focus but yesterday’s retail sales print also carried significant importance as consumers drive two thirds of US GDP performance, and are therefore a key barometer on the health of the economy.  The good news for the Rand is that we got a worse than expected figure for January while December’s figure was also revised lower, this as December was changed from 0.6% to 0.4% growth while January came in at -0.8% contraction when -0.1% was the call.  Softer than forecast retail sales can be seen as a reason for the FED to start thinking about rate cuts, and with bets of a June cut climbing to 80% that knocked the Dollar back while pushing equities higher.

• While soft US retail sales helped us hit R18.93 we also got a barrage of other US data releases, some of which supported the Dollar and put a floor under the greenback’s losses.  The closely watched weekly initial jobless claims fell from 220 000 to 212 000 which is not what the FED wants to see while economic activity reports from the New York and Philadelphia FED research teams both came in stronger than expected, also what the FED doesn’t want to see.  A poor retail sales report was enough to push the Dollar lower, but unfortunately not as far as it could have done if released in isolation. 

• At a global level we saw that both Japan and the UK fell into technical recessions as their economies contracted over Q3 and Q4 last year.  While recessions are not good the following Reuters suggests more lenient central banks as a result could be the silver lining:  Figures on Thursday showed that Japan and Britian slipped into recession at the end of last year, and US retail sales last month fell much more than expected. But the upshot of that could be relatively looser monetary policy. “I think the demand picture is certainly starting to fracture in some of the developed market economies,” said Tony Sycamore, market analyst at IG. “So it does bring forward the idea of rate cuts. One by one the dominoes are starting to fall. The UK and Japan fell yesterday. Obviously there’s a long way to go for the US to fall into recession because their numbers have been pretty good. Europe, you know it could be the next to go. And China’s not great.”

• There is very little on the local front to move the Rand so we’ll be hoping that another boost is in store when US producer inflation stats are reported at 3:30pm this afternoon.  PPI is often overlooked, but with Tuesday’s CPI reading having had such a big impact investors will now turn to PPI for any clues on where CPI might be headed.  Headline PPI is already down at just 1% while core is at 2.5% so hopefully these manage to move lower still, and if they do then the Rand should have a good end to the week.  The opposite is also true I’m afraid. 

• No local market data today. 
• Possible USD mid rate trading ranges in the Rand today are R18.85 and R19.15.

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