Rand Strengthens as Dollar Weakens on US Jobs Data

Good morning

My last forex report was sent out two Fridays ago, and in the currency market, a lot can happen over ten days, and in this instance it did.  The good news is that most of the developments have been Dollar negative, which means the Rand is sitting pretty as we go into the new week.

These are the mid rates at 7:20 today:

USD = R16.16	AUD = R11.41
GBP = R21.92	DXY = 99.50
EUR = R18.74	Brent Crude = $88.61 per barrel

Market News

• Over late July and early August, the Rand seemed to be stuck in a narrow trading range hovering around the late R16.40’s and early R16.50’s to the Dollar.  Last week, however, saw us take a meaningful stride stronger, with the Rand touching R16.08 as the week’s best level before settling into a pattern around R16.15, and we open today at R16.16.  The catalyst for this move was a number of US market data releases which surprised the market, but unfortunately their calendar this week is rather empty so we’ll just have to see if any further gains for the Rand can be achieved. 
• This first, and definitely most significant development as far as the currency market is concerned was the US monthly jobs report which came out on Friday the 7^th of August.  After a string of stronger-than-expected reports, the market was expecting 80 000 new jobs to be added in July, so it was a big surprise when not only did we hear that the US economy lost -23 000 jobs for the month, but that May and June’s reports were revised lower by a combined -103 000 jobs. 
• Going into this jobs report, the health of the US labour market wasn’t even a consideration, but that all changed in an instant, and with it so did bets that the FED is primed to lift interest rates in September, as their focus was solely on the elevated US inflation story.  A September hike is not completely off the table as far as the prediction market goes, but this much weaker-than-expected jobs report put a severe dent in those predictions, and as a result the Dollar Index took a direct hit, which allowed the Rand to strengthen. 
• The US jobs report was great for the Rand, and then came their monthly consumer and producer inflation reports last week, and those two were Dollar negative, and therefore Rand positive.  CPI increased by a modest 0.1% from June to July, which was in line with expectations and did nothing to spook the market, and then a day later we got their producer inflation report, which came in unchanged at 0.0% over the previous month, and that too gave the market no reason to panic.  The end result was that bets of a September FED rate hike have fallen from 95% only a few weeks ago to 30% now, a material change in sentiment and one that is weighing on the Dollar Index. 
• US market data releases have been music to the Rand’s ears of late, but the week ahead only has the release of the latest FED minutes on Wednesday, and that seldom has a major impact on the market.  Unfortunately, that means that currency traders will only have the Middle East to focus on, and with those headlines seemingly in a stalemate where the much-promised deal to open the Strait of Hormuz is proving as elusive as ever, we can only hope that the Rand manages to hold onto last week’s welcomed gains. 
• No local market data today. 
• Possible USD mid rate trading ranges in the Rand today are R16.05 and R16.35.

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