Last week, even though it was a short week, it was nevertheless a very interesting week with moves in the market. Last week saw the first glimpses of data of the US starting to stumble a little, we had the oil cuts from OPEC and its allies as well, as one of the biggest data releases on a day when market had thin liquidity, with the US non-farm payroll numbers coming out on Friday.

US non-farm in unprecedented territory


First, we had some data of the US coming in worse than expected. Even though the data was mostly second tier like PMI’s and initial jobless claims, the fact that these numbers have turned softer will have piqued the interest of the market and will have made its way into the conversation of the Fed. Of late we have some tremors in the market with the first signs of a banking crisis in the US and Europe and now weaker data out of the US. Weaker data will only show that the US economy is slowing and this will cause the market looking to the Fed to start pausing its rate hikes in order not to strangle the economy.

On Friday we had the US non-farm payroll number came in at 236,000 jobs created in March versus 230,000 expected. This put a bit on a brake on the worse-than-expected data out of the US, but it is also the first number to print close to consensus in quite a while. The number was positive for the US dollar as it bucked the trend as explained above, but it was not convincing enough to see the US dollar rally hard in thin liquidity conditions. There is enough evidence in the market that the next Fed interest rate decision might not be as straight forward as it was a couple of months ago.

Inflation falling in the US


CPI Number out today

Senior Dealer Andre Botha gives us an update in the video below:

US CPI data out - what does this mean for the Rand?

Rand should perform better

On to the rand where it weakened last week after riding the wave of the interest rate hike and breaking above the R18.50 level on Monday – granted that it was in thin liquidity conditions. We have seen the rand rally a little on the back of the US dollar weakening and is trading around the R18.30 level. While there is a big premium in the rand currently that is of our own making, there is significant risk with the US CPI number that could give direction for the rand for the next week. It is evident that the rand is undervalued but a catalyst is needed for the rand to show meaningful gains and break the risk premium associated with the currency.