In this week’s market review, we discuss the recent PMI index data from the US, which remains strong compared to other regions like the UK and Europe. The US economy shows resilience despite a tight monetary landscape, reflected in robust PMI and job creation data. The US has added jobs for 41 consecutive months, although many are part-time and temporary due to the Northern Hemisphere’s peak holiday season.
The Fed is focusing on reaching its 2% inflation target, which might take up to two years. Although recent inflation figures show a downward trend, they remain significantly above the target. Until inflation decreases substantially, interest rates will likely remain high. We also touch on the ongoing geopolitical factors affecting the economy, such as wars requiring American-made arms, which impact unemployment and jobless claims.
We examine the Japanese yen, highlighting its weakness due to unchanged monetary policies and low interest rates. Despite interventions by the Bank of Japan, significant currency changes require fundamental shifts in interest rates, which are currently absent. The yen’s current levels against the Rand are similar to those seen in 2018-2019, with potential for future intervention from the Bank of Japan if these levels persist.
Lastly, we address the South African Rand and its sensitivity to the country’s political landscape, particularly the formation of the Government of National Unity (GNU). The Rand remains slightly weaker but within a stable band of R17,50 – R18,50. The market is watching for the GNU’s effectiveness, which will influence the Rand’s future stability.
Forex Risk Management