Rand Morning Briefing: Pressure mounts
Bottom line: The rand is under renewed pressure but moves will be determined by this afternoon’s US non-farm payrolls figure for June. Trade starts at 14.48.
- After the Fed surprised, I asked: Is the strongest ZAR behind us?
- Many said yes; I still think no, but doubts are growing
- EM currencies are under pressure, rand tracks with the pack
- Yesterday’s June US ISM survey showed economic strength
- But it also showed increasing inflationary pressure
- Worrying, as inflation pressures were supposed to be “transitory”
- Inflation should still fall off, but the waiting is getting on nerves
- Dollar only a little stronger but EM currencies reacted very badly
- ISM the catalyst; fuel partly concerns over long Covid in EM
- Rand “pullback” is now close to the biggest this cycle
- All eyes on US payrolls (14:30): consensus is for 720k job creation
- A strong figure would imply ZAR weakness
- With ZAR and EM on edge, large moves are possible
- SA rates trade higher in line with USD/ZAR
- Early week foreign inflows haven’t sustained
- FRA’s now pricing 2+ hikes of 25bp by SARB before year-end
- That’s the most aggressive pricing we’ve seen this cycle
- Question: Will the rand keep falling if the SARB doesn’t hike soon?
- SA Covid: cases rocketing but Gauteng shows signs of decelerating
- OPEC meeting failed to come to an agreement; resumes today
US ISM survey: Confidence is high, but price pressures are huge
Source: RMB Markets