Rand fights back strongly to reverse early week losses

The rand experienced a significant drop of nearly 65 cents against the dollar in the first two days of last week, driven by weak economic data and increased political interference. 

Initially, the dollar gained strong support, starting just below R18 and then climbing 40 cents to settle at R18.32 by Monday’s close. This day also saw disappointing Manufacturing Purchasing Manager Index (PMI) reports both domestically and internationally. South Africa’s June PMI was 45.7, up from May’s 43.8, marking the second consecutive month of declining factory activity. In the US, June’s PMI was 48.5, the third month of reduced manufacturing activity.

On Tuesday, the rand continued to weaken, dropping further throughout the South African trading session, reaching R18.66 by the end of the day.

However, the rand gained strength on Wednesday, maintaining its momentum through the week. This recovery was influenced by softening US employment data, indicating a slowing Dollar economy, and a surprising landslide victory for the Labour Party in the UK elections, which garnered 35% of the vote and ended the Conservative Party’s 14-year reign. This election result is expected to reshape the UK’s political and financial landscape.

Further contributing to the rand’s recovery was the highest US unemployment rate since November 2021, which reached 4.1% in June. US payroll data showed only 206,000 jobs added in June, below the revised 218,000 in May, suggesting a possible rate cut sooner than anticipated by investors.

Despite the week’s volatility, the rand ended at nearly the same rate as the previous week’s close, with little net movement on a week-on-week basis. We now prepare for another eventful week ahead.

Upcoming market events

Wednesday, 10 July

  • USD: Federal Chair Powell’s speech

Thursday, 11 July 

  • ZAR: Manufacturing production data
  • USD: Inflation rate
  • GBP: GDP growth rate (May)

Friday, 12 July

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