Forex Market Report

24 November 2023

The Reserve Bank’s recent interest rate hiking cycle has had the singular focus of dampening demand by making debt more expensive, and in so doing bringing down inflation.  This week saw CPI rise to 5.9%, not what the SARB wants to see, and with today being Black Friday will we also see throngs of shoppers storming the malls ready to spend? 

These are the mid-rates at 5:40 today:

Market News

• With the US and Japanese markets closed yesterday there is not a huge amount to report from the currency market.  We did manage a quick look at R18.71 to the Dollar after opening at R18.86 but those gains were given back with us spending most of the day in the early R18.80’s.

• With limited trading in the currency market moves were difficult to come by but we did get a small spike in the Euro thanks to better than expected services and manufacturing PMI reports.  It should be pointed out that the PMI’s for the Eurozone as a whole, as well as Germany in particular, are still in contractionary territory, but by coming in a little higher than forecast this suggests that their recession might be less severe than first thought and this was enough to lift the Euro.  A stronger Euro was enough to push the Dollar Index marginally lower, its first loss for the week, and that allowed the Rand to hit R18.71.

• The following is from Reuters:  The Euro edged up on Thursday after data suggested the downturn in the Eurozone economy may be starting to ease,  although holidays in the US and Japan kept trading activity muted. “There’s been a bit of an upside surprise on Germany and the Eurozone and yes, it’s an improvement on the prior, but all this is saying is things are getting slightly less bad,” TraderX strategist Michael Brown said, of Thursday’s flash Composite Purchasing Managers’ Index (PMI) for November. The survey showed the Eurozone economy is on track to contract again in the fourth quarter.

• Locally the SARB left prime unchanged at 11.75% as was widely expected, and governor Lesetja Kganyago was hawkish in reminding us that further rate hikes could not be ruled out should inflation continue to surprise to the upside.  Kganyago’s tone was also expected and so this hawkish pause had very little impact on the Rand.  With any luck we will see much lower fuel costs over November and December coupled with a slightly improved exchange rate pull through into lower CPI readings, and therefore no need for the monetary policy committee (MPC) to lift interest rates from their already 14 year high.

• The following is from Reuters and suggests the FED is done hiking rates and no longer on pause before going again which was the implied situation before yesterday’s meeting:  The Dollar fell broadly on Thursday, tracking a slide in US Treasury yields as markets grew more convinced the Federal Reserve was done with its aggressive monetary policy tightening cycle after it left rates unchanged. “It seems to us that the FED is now in hold mode, albeit in a hawkish way, rather than simply on pause,” said Wells Fargo chief economist Jay Bryson. “That is, we think the bar to further rate increases is higher now than it was a few months ago.”

• No local market data today. 

• Possible USD mid-rate trading ranges in the Rand today are R18.65 and R18.95.

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