Resilient Rand holds it’s own once again!

fuel

Another rummy old week passes us by, as the markets continue to surprise many with their ducking and diving. The Rand continued to push stronger despite the Dollar’s recent strength, which took a minor tumble during the week…

…and it was not only the Dollar, but other markets that also surprised, like Gold and Oil, which both came close to testing all time highs before reversing sharply.

The winds of change are certainly coming, and the markets are on edge because of it, even as the Russia-Ukraine conflict rolls on. Let’s get into the full review to see what we can make out of the days ahead.

Key Moments (7-11 Mar 2022)

The week was filled with action, and these were some of the biggest headlines:

  • Oil Volatility – massive swings in oil’s value have been common over the last few weeks, but it got even worse this week with the US’s ban on Russian oil
  • Economic World War – while the conflict is between Russia/Ukraine, the war has quickly become a global one – not with weapons, but with economics…
  • SA’s Stance on Russia – Ramaphosa’s inability to pick a side in the war has been frustrating, but this week, all became clear

The Rand began the week trading around R15.32 to the Dollar, and had endured a shaky few previous days.

Everything remained in a hold-tight-and-see sort of pattern, as no one was quite sure what was coming next.

The Russia & Ukraine conflict was still front and centre of all focus, yet the conflict itself had sort of stalled. Russia’s expectation clearly was for a Blitzkrieg style attack, which would cripple Ukraine and take Kyiv in days…

…this has not worked out, and now their horrific logistics is being exposed.

Yet their might of military power is still not to be trifled with, but this delay has meant that it has given time for the world to react, and the effects to be felt in Russia.

What has ensued has been an economic war of a scale that we have never seen before, as company after company pulled out from Russia, and throw their weight behind Ukraine’s fight.

This week followed the same pattern with more sanctions, and more companies turning their back on Russia – and ultimately resulting in a ban on Russian energy by the USA…

…to make this truly crippling for Russia, Europe would need to do the same, but they are too reliant on Russian energy for this to be a possibility right now.

Still, the effects in Russia are real as it is – with the Ruble at nearing 50% of what it was worth back in December, and now the shortages starting to affect the whole country.

The counterpart to all these sanctions and Russian oil etc, is that oil prices have been going for an absolute loop! Fuel prices sky-rocketed across the world and especially the USA, with prices per gallon hitting record highs of $7 per gallon and above in some places – as oil’s price per barrel flew to around $130 a barrel, before whiplashing back down to $104 in the second half of the week!

As for the Rand, this volatility for once seemed to play into it’s favor, as we saw the local unit push down stronger through Tuesday and Wednesday, eventually getting down to sub R15/$ levels by the evening…

It was a crazy week, that was for sure!

And then in other news:

  • RSA growth rate numbers released during the course of the week (1.7& YoY, 1.2% QoQ), and created little to no movement (relative to the rand’s usual escapades). This suggests that the uncertainty around Russia and Ukraine’s future has forced analysts to give up on trying to predict movements, leaving us in the limbo state of ‘wait and see’. Essentially, the focus of the the moment is so centred in one place, basically all other events have been negated!
  • Some key figures do remain in focus though, and the number 1 is inflation – with the US CPI pushing to a record of 7.9% in February, as food and energy costs pushed prices to highest in more than 40 years. The perfect storm between pandemic economic knock-on effects, supply chain issues and now war have created a monster in inflation, and it is clearly out of the Fed’s control – and every other Reserve Bank around the world.
  • Ramaphosa has remained largely silent and non-commital on the war in Ukraine, but this week that all changed following a call between him and Putin – where it became, despite diplomatic language, that SA was in essence siding with Russia in the conflict…there are not too many worse decisions that Ramaphosa has made in his entire tenure or even life! In a conflict which is dividing East and West, Ramaphosa has chosen East, pitting SA in direct opposition to Europe and America.
  • Locally, Eskom troubles plagued the week once again, as Stage 4 load shedding was briefly introduced before emergency reserves recovered once again to reduce the pain to Stage 3 into Friday.

As we headed into the end of the week, talks between Russia and Ukraine once again did not seem to end with much fruit to be seen, although Putin claimed that there had been progress.

With Russia having a history of propaganda on the one hand, and mainstream media having proven themselves in recent years to be less than credible on the other, it becomes tough to know quite what to believe…

…either way, the Rand closed out the week rather jittery, despite gaining all of about 30c during the course of the week, despite Gold having reversed fortunes, losing between $80-100 in the week! And so the resilient Rand forged on!

The Week Ahead (14-18 Mar 2022)

And so the March rollercoaster continues!

While it is clear that the market is paying less and less attention at the moment to economic events, there are some triggers in the days ahead with events worth watching:

  • US – Retail Sales, Interest Rate Decision, FOMC Projections, Fed Press Conference, Jobless Claims
  • UK/EU – CPI, BoE Interest Rate Decision

But once again, clearly the Russia & Ukraine conflict and the global implications will continue to be in the headlines, as tensions continue to increase globally as to where this is all heading.

As for the Rand, can it hold on to its gains of recent weeks? The next few days could prove be interesting…

If you have any questions or feedback, please let me know. To your success~ James Paynter

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