Yesterday, heavy rains continued to batter 7 of the countries 9 provinces. A state of disaster has been declared. In parliament the debate around the SONA raged high, with most taking to the podium to attack and slander one another and politicking was the order of the day.

These are the mid rates at 6:40 today:

USD = R17.93  AUD = R12.47
GBP = R21.84  DXY = 103.40
EUR = R19.26Brent Crude = $84.70 per barrel

  • It looked like the Rand’s hopes had come true for the briefest of moments yesterday, but as we then started the fall we were actually spared what we had initially feared.  All-in-all the day was OK.  The RAND opened the days trade at R17.83 to the Dollar and hardly moved until the US data release at 3:30pm which sent us rocketing to R17.68 before immediately dropping back to R17.92 which is a loss, but only a small loss.
  • On Valentine’s Day the market only had eyes for the US consumer inflation report, and this could be seen in the Rand’s inactivity throughout the day.  Trading in a narrow range doesn’t begin to describe Rand movements before 3:30pm, but as soon as the data was released volatility picked up as expected. 
  • Most of the day, analysts were predicting that CPI’s 6-month downtrend was set to be interrupted despite the market expecting a fall from 6.5% to 6.2%, and fears were building that an upside surprise was on the cards which would have been hugely Dollar positive. 
  • It was with some relief then that the January inflation figure came in at 6.4%, higher than the predicted 6.2% but still below December’s 6.5% and stretching its declines into a seventh consecutive month.  The day’s anxiety was immediately released with the Dollar Index dropping while the Rand powered to R17.68.  But the relief was short lived as CPI’s year-on-year drop was the smallest possible while the month-on-month figure actually increased from an upwardly revised 0.1% to 0.5%.  The market’s conclusion was that the FED cannot use this CPI report as a reason to pause in their rate hiking cycle and the Dollar quickly snapped back.
  • The good news is that the FED’s next policy meeting is only on the 22nd of March and we will get another jobs report and inflation report on the 3rd and 14th of March respectively.  The FED have clearly communicated that they are data dependent, with no pre-programmed policy path, so there is still an opportunity for the data to change the picture in our favor.
  • Locally we get our own inflation reading today as well as December’s retail sales report.  Inflation in SA is still above the SARB’s 6% upper target range but today should see a fall from 7.2% to 7.0%.  Whether that is enough to convince the central bank that further interest rate hikes are not needed remains to be seen but given yesterday’s US data, and the inference that the FED will keep hiking, one would assume that higher local rates are also on the cards so as to defend the Rand. 
  • Local market data today sees our CPI report at 10:00 followed by retail sales at 1pm. 
  • Possible USD mid rate trading ranges in the Rand today are R17.80 and R18.10. 

Yesterday marked 10 years, that Reeva Steenkamp was gunned down – RIP

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