The Rand has fought through another week, but remains on shaky ground as we look for some clear direction as to what the days ahead hold.
The local unit just cannot seem to catch a break of news, as the slew of global and local shockwaves continued.
This week, Eskom was back in the news…
…and for the wrong reasons once again.
But despite that, the Rand managed to largely hold off a collapse – until Friday rolled around. However, more on that later…let’s get into the full review and see what we can assess and figure out for the days ahead!
Key Moments (31 Jan – 4 Feb 2022)
These were the biggest headlines from the 5 days:
- Ukraine Tensions – things continue to simmer as NATO and other allies watch closely, mobilizing troops and awaiting Russia’s next move…
- Eish-Kom Again – it seems the power utility only has bad news for us these days, and back it was again with more load shedding…
- Interest Rates – the pendulum seemingly has swung the other way for every nation now as the UK was the next to raise interest rates higher again
So to start with the Rand, we began the week just a shade under R15.60 to the Dollar, a rather precarious position with R16 to the Dollar beckoning once again…!
But despite all the thorns in the side of the market, the Rand pulled another one out of the hat as the Dollar weakened significantly, which meant there was some relief after all of the losses.
Such was the turn of fortunes, that by Tuesday, we were testing nearly sub R15.20 again!
This was despite the worries from Eastern Europe, as the USA mobilised 8500 troops and had them on heightened alert to deploy into European ally countries. This means they are ready to go at any moment, showing just how precarious the situation is.
And to add to that, apparent intelligence came out later in the week that Russia was planning to ‘frame’ their attack with a propaganda video that would give the impression that Russia had been attacked by Ukraine, with graphic footage acted out in order to justify the invasion of Ukraine…it remains to see if this bears any truth or whether this is merely a false flag itself.
So tensions remain high…what next?
To go with that, the Rand had it’s own local worries, as Eskom was once again in the news for all the wrong things.
We are back to load shedding, and Stage 2 load shedding at that. This was moved to level 1 on Friday evening, but just leaves that niggly underlying feeling that all is not well, and how is the strain on the electrical grid going to be managed, as the country faces the winter of 2022? Electricity demand goes exponentially higher then, and somehow it is going to have to be controlled. If there is not enough supply in summer…then problems are on the horizon!
But to get back to the local unit, we saw it move to a fairly solid position by Friday morning, trading around R15.30… …but it didn’t last!
With Friday came the biggie for the month US Nonfarm Payrolls, with the latest stats showing that a massive 467,000 jobs were added in January 2022, showing a very strong demand for workers.
This was one again a trigger for the tide to change very quickly for the Rand. Before we knew it, the ZAR was back over R15.50!
Such is the very uncertain and agitated state of the markets at the moment – when will calm descend?
The fact is that many affects of the ‘pandemic’ are only being felt now.
Fed speakers stated that a March rate hike is likely, but the road map for the rest of 2022 remains unclear, walking back some of Fed Chair Jerome Powell’s hawkish comments.
But the Bank of England imposed back-to-back interest rate hikes for the first time since 2004, increasing interest rates by 25bps as energy prices jump over 50%. The increase in cost of living translates to the biggest fall in take-home pay since 1990 as the bank forecasts inflation will reach 7.25% YoY in April.
The good old “rate hike” method of dealing with inflation may appear to have some merit, but increasing rates in all major markets has the potential to adversely affect global growth, which is desperately needed.
No-one likes a recession – let along a deflationary depression.
So we are heading into some interesting days…and the Rand eventually dragged itself to the close around 15.45 to the US dollar, 17.70 vs the Euro and 20.90 to the Pound…
…so no real change from a week ago (except for the EUR/ZAR) as it waits for the next trigger and flurry of activity. And that was the wrap!
The Week Ahead (7-11 Feb 2022)
Looking to the week ahead, there are some events that are in focus for us to see whether they can provide triggers to stimulate some clear market movement:
- SA – State of the Nation Address
- US – Balance of Trade, Jobless Claims, Jobless Claim
- EU/UK – Goods Trade Balance, GDP Growth Rate, Balance of Trade
How is the Rand likely to fare with all the above, and all the other potential triggers and plenty to keep the market on its toes, what with Russia/Ukraine, continued stock market jitters, inflation worries, and increasing social and geopolitical uncertainty.
Our Elliottwave-based forecasting system is showing the Rand could continue to be under some pressure, but it is unlikely to be one-way traffic. We will be looking at some key levels to confirm our projections for the coming days and weeks ahead, and if these play out, we could be in for quite a rollercoaster. Until next week!
Please take our Rand forecasting service for a test-drive! This will give you access to the same charts we are to give us and our clients the likely direction of the Rand – ahead of time, enabling you to make educated and informed decision. Simply use the link below to get access now. No charge. No card. All yours to trial for 14 days.
Click here to access to our forecast from Friday on the house!
If you have any questions or feedback, please let me know. To your success~
James Paynter