Rand to Dollar: R16.48 as Oil Eases, US CPI Looms

Good morning

Congratulations are definitely for South African Navi Pillay, who on Friday was awarded the Nobel Peace Prize for her lifetime of work as a human rights lawyer, both within SA as well as on the international stage!!!!

These are the mid rates at 6:00 today:

USD = R16.48	AUD = R11.51
GBP = R21.84	DXY = 102.17
EUR = R18.48	Brent Crude = $103.04 per barrel

Market News

• The Rand is hoping for a peaceful week ahead, but with a major data release on Wednesday, things could get a little volatile.  The good news is that despite a bumpy ride for most of last week, we made it into the low R16.50’s to the Dollar by Friday morning and barely moved from there over the rest of the day, and we go into the new week at R16.48.
• While the price of Brent Crude is still elevated at $103/barrel, it has come down slightly from the $105/barrel it sat at last week, and this easing in energy prices has been good for the Rand.  Oil’s dip has come from two sources, one being reports that Iran has reached out to Saudi Arabia to address their conflict with Yemen-based Houthi Rebels (who are backed by Iran) and the other is Donald Trump announcing an “energy ceasefire” between Ukraine and Russia.  This ceasefire, where neither party will strike at the other’s energy infrastructure, is designed to prevent further pressure on an already strained refined product market, but while it has had an immediate impact by lowering the price of oil one wouldn’t be surprised to see the White House-brokered deal broken at any time. 
• Lower energy prices for the reasons listed above is a welcomed development, but there’s a new factor that nobody can do anything about, and that’s Hurricane Isaias, which has strengthened to a Category 3 storm as it approaches the U.S. Gulf Coast.  Refineries in the area have no choice but to throttle back on their production during periods of extreme weather, so there’s a chance that any good news from the ongoing conflict zones is offset by Mother Nature in the US. 
• The price of oil will impact the Dollar and the Rand this week, but all eyes are on Wednesday’s US consumer inflation report as this is the last major data release before the FED’s next policy announcement on the 28^th.  With the recent US jobs report coming in softer than expected, and with FED speakers mostly giving the impression that the central bank need not rush into their next interest rate hike, that has seen bets of them pulling the trigger this month fall to 19%.  The Dollar Index’s gains over recent weeks have been capped by this cooling FED sentiment, but if CPI comes in hot on Wednesday, that will be music to the Dollar’s ears.  The Rand is hoping this is not the case. 
• The currency market will also have an eye on the bond market to see if the recent surge in yields takes a breather, or continues to run.  Fortunately, we saw signs late last week of the former, with the benchmark US 10-year Treasury pulling back from a 24-year high it hit earlier in the week, an easing that was part of the reason why we could move into the low R16.50’s.  To be sure, the global bond market remains on edge, but with any luck the worst is now behind us. 
• No local market data today. 
• Possible USD mid-rate trading ranges in the Rand today are R16.35 and R16.65.

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