These are the mid rates at 7:20 today:

USD = R19.22 AUD = R12.80
GBP = R23.91 DXY = 103.28
EUR = R20.79Brent Crude = $76.40 per barrel

Not a bad start to the week for the Rand as we remained decoupled from the Dollar, but this time both of us strengthened on the day.  We opened at R19.45 to the Dollar, suffered a brief setback to R19.49 but then quickly strengthened to R19.20 where we pretty much stayed for the rest of the day.  

Locally there were three topics of discussion which helped support the Rand, although admittedly two of them are parts of the same story.  First was the relief that S&P chose not to lower out credit rating outlook on Friday evening, and by maintaining their stable view that gave the market confidence that any further slippage into junk territory is not on the cards at the moment.  With all the challenges that our economy is facing at the moment it would not have been a surprise if S&P had adjusted their outlook to negative, and so this reprieve was welcomed by the market and allowed the Rand to strengthen.

But most of our local strength is coming from expectation building ahead of Wednesday’s inflation print, and more importantly, what that means for the SARB’s interest rate decision on Thursday.  As usual there are varying projections for where CPI will come in but all of them are comfortably above the SARB’s 6% upper target, and as such bets are now being placed as to just how aggressive the SARB could be when hiking rates.  25bps seems the consensus call but there is talk out there of 50bps, and even a whopping 75bps, and the Rand is catching a bid on these outsized speculative notions.  

The following is from MoneyWeb:  The Rand strengthened on Monday amid relief that South Africa’s credit rating was not downgraded and bets on a large interest rate hike, with a central bank announcement the main focal point of the week. Analysts polled by Reuters predict a 25-basis-point (bp) rate hike by the South African Reserve Bank on Thursday, in what could be its final hike of 2023. “This will be one of the most important decisions in years. Our house view is for a 25 bp hike,” Rand Merchant Bank analysts said in a research note. “Market pricing shows that they will do at least 50 bp, and maybe even 75 bp. The more they hike the better for the Rand.”

Fingers at the ready then for a potential buying opportunity on Thursday afternoon but hopefully any gains that the Rand is able to make are not stunted by a stronger Dollar.  Yesterday saw the Dollar Index get close to its recent 9 week high thanks to safe haven flows coupled with multiple FED speakers not only pushing back on the idea that the FED will start cutting rates this year, but some also intimating that the FED is not done hiking interest rates yet.  There’s a new word in the FED’s jargon, the “skip”, meaning that even if they don’t hike rates in June that doesn’t mean they won’t hike in subsequent meetings, and this saw the Dollar post gains against most currencies yesterday. 

A purportedly AI-generated photo of a fake explosion at the Pentagon spread rapidly on social media on Monday prompting mass confusion among users and a brief selloff in the US stock market. The fake photo, which showed smoke billowing outside the Pentagon, was shared by Russian state media outlet and other accounts alongside claims that an explosion has occurred at the complex. RT later deleted the image. The Arlington County Fire Department quickly tweeted a message debunking the hoax photo.

US equities traded in a tight range yesterday, with neither the S&P 500 nor NASDAQ making meaningful progress in either direction. Chinese stocks had a better day. The CSI 300 moved up 0.63% while the Hang Seng rose 1.17%. Markets may be unwilling to take big bets ahead of any potential debt ceiling agreement. It doesn’t sound as if much progress was made yesterday as talks resumed. Fed hawks helped keep pressure on US Treasury yields. Federal Reserve Bank of Atlanta President Raphael Bostic is still in the camp who would like to hold interest rates steady next month while his Richmond colleague Thomas Barkin prefers to keep his options open. “Our policy works with a lag. And we’re just at the very beginning of this time when that lag is starting to play out and you’re starting to see tightness emerge,” Bostic said on Monday. “Right now, absent a big change, I think I will be comfortable saying let’s just look and see how things play out.” Officials have raised rates 5 percentage points in the past 14 months to curb inflation.

Rishi Sunak has managed to last 200 days as UK prime minister. That is four times as long as his predecessor Liz Truss. But the fragility of the party that he leads is such that knives are out on the back benches. In a way, it has nothing to do with him. No matter how well he performs, the Conservative party is in the throes of a nervous breakdown. There are tell tale signs. The first sign is the loss of seats and councils at the local elections on 4 May. Normally, the party in power always loses seats. The test is how many and how badly.

UK and US regulators were told of a state-led drive to “rig” interest rates in the 2008 financial crisis, but covered it up, evidence indicates. Documents suggest lenders sharply dropped their interest-rate estimates after pressure from central banks. Evidence was not shown to juries at the time when bankers were jailed for smaller-scale interest-rate “rigging”. Regulators said they had followed disclosure rules, declined to comment or in one case rebutted the claims. Some evidence has previously emerged of Bank of England and UK government involvement in manipulation of interest rates.

The European Union slapped Meta with a record $1.3 billion privacy fine Monday and ordered it to stop transferring users’ personal information across the Atlantic by October, the latest salvo in a decadelong case sparked by U.S. cybersnooping fears. The penalty of 1.2 billion euros is the biggest since the EU’s strict data privacy regime took effect five years ago, surpassing Amazon’s 746 million euro fine in 2021 for data protection violations. Meta, which had previously warned that services for its users in Europe could be cut off, vowed to appeal and ask courts to immediately put the decision on hold.