Forex Market Report

Friday is here and if you don’t have many plans for the next two days, and like watching sport, then the weekend is bursting at the seams! The Olympics officially opens today with a multitude of sports from tomorrow, and then there’s the big one tomorrow evening as the Springboks lock horns with the British & Irish Lions. GO BOKKE!

Market News

• So much for our monetary policy committee struggling to move the Rand as I alluded to yesterday as their announcement was met with a swift selloff. We drifted sideways in the low R14.50’s ahead of the MPC but fell to R14.75 in the immediate aftermath. 
• Polls conducted by Bloomberg and Reuters in the build-up to yesterday’s announcement were unanimous in predicting that the MPC would keep our interest rate unchanged, and that is exactly what they did with the repo rate staying at 3.5% which leaves prime at 7%. But the polls could not predict what SARB governor Lesetja Kganyago would say in his press briefing and the tone of his message was particularly downbeat saying that all of our good recovery work done in the first quarter of 2021 was unwound by the looting and this hurt the Rand. 
• With last week’s looting and destruction fresh in the mind Kganyago and the rest of the MPC team said that they were about to lift SA’s growth forecast but with the disruption to our supply chains now curtailing growth their forecast of 4.2% in 2021 remains in place, and that we would not return to pre-pandemic economic levels until 2023. Kganyago went on to say that local and international investor sentiment would have taken a knock from last week’s lawlessness and the Rand duly registered the severity of his remarks as we fell to R14.75. 
• The following is from Business Day:  The violence that disrupted SA’s key supply chains negated a strong economic recovery in the first quarter and prevented an upward revision of full-year growth forecasts, the Reserve Bank said on Thursday as it kept its benchmark interest rate at a record low. “The recent unrest and economic damage could have lasting effects on investor confidence and job creation”, the MPC said in its statement. “We estimate the unrest to have fully negated the better growth results from the first quarter…. The direct and indirect costs of recent events will likely further slow SA’s economic recovery.”
• In yesterday’s other monetary policy announcement, the ECB stuck to the script in pledging to keep Euro interest rates at record lows for an extended period of time. The Euro dropped as a result, albeit only marginally, but with the ECB likely to lag other major central banks in tightening monetary policy that paves the way for the Dollar to outperform as and when the FED finally announces the end to their ultra-loose policy (probably at next month’s Jackson Hole symposium).
• The following is from Reuters and points to a buoyant Dollar which will make meaningful Rand gains difficult to come by:  The uptrend in the Dollar Index is “showing tentative signs of stalling around 93.0, but its overall resilience regardless of the shifting risk mood and the ECB’s shift to a more structurally dovish policy stance suggest retracements will likely be limited to the 91.5-92.0 zone,” Westpac strategists wrote in a client note. “The US is better positioned than others to withstand the spread of the delta variant thanks to its earlier strong vaccination drive.”
• No local market data today. 
• Possible USD mid-rate trading ranges in the Rand today are R14.55 and R14.85.  

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