overview

The Dollar and major currencies lost strength against the Rand in the past 2 days after weak initial jobless claims was released in the U.S. Anticipation has risen on how the non-farm payrolls will perform later this afternoon and will determine how the markets will move in the coming week.

u.s and s.a markets

The greenback was bearish yesterday, losing ground in anticipation of the U.S Jobs data (Non-farm payrolls) that is due for release this afternoon, all in the midst of growing concerns surrounding a possible recession. The Non-farm payrolls is a key indicator of how the economy of America is performing. It is expected that there will be an increase of 250,000 jobs for the month of July which is lower than June’s 372,000 job increase. Any signs of a weak labour market will result in the reassessing outlook  of interest rates in the U.S by investors and the Fed

Initial Jobless Claims increased by 260,000 from 254,000 in the week before. This has since resulted in a weaker Dollar as investors concerns are growing with regards to the rate outlook as the Fed is very data dependent when making interest rate decisions. With this in mind, there is a possibility that the Non-farm payrolls will miss expectations, translating to softening labor market that will result in the Dollar losing more ground against the Rand.

Locally, load shedding woes are back again with the nation under Stage 2 of no power today. It is unclear if this will continue into the weekend, but for today, stage 2 is certain.
In more positive news, in a bid to improve trade and investment between America and South Africa, US investors with more than $1 trillion of assets will arrive in South Africa this Sunday to seek investment opportunities surrounding South Africa’s transition to using renewable energy in electricity generation.

Technical:
The USD/ZAR is currently trading on an upward trend on the daily chart, thus in the long term the Dollar is more-likely to strengthen. The start of the week started with a low of R16.42/$ and rose to a high of the week at R16.92/$ on Wednesday. Today we open the market at R16.62/$ which is a level of support. As the markets anticipate the non-farm payrolls, there won’t be much volatility up until that data is released at 14:30 SAST. Should the jobs data be weaker than expected, we can expect the pair to test a low of R16.40/$. Should the jobs data be higher than expected, the dollar may strengthen to a high of R16.86/$.

european markets

The Euro Zone released their monthly retail sales data on Wednesday. The retail sales fell to 1.2% compared to a level of 0.4% in June. This shows that the economy is contracting and that is not good for the Euro. Yesterday, the Italian Prime Minister Mario Draghi and his government approved what they called an “economic aid package” worth EUR 17 billion to assist families and business curb the sky rocketing energy costs and consumer prices. This anti-inflation package will help steer the economy in the direction of normality to help the economy get back on its feet.

The Eurozone’s GDP increased by 0.7% in the second quarter however, some experts expect that the pressure of the energy crises as well as the soaring inflation, this could quicky change.
The EU is very dependent on Russia for energy and the energy giant Gazprom has warned that they might need to reduce gas supply due to Western Sanctions. The Nord Stream 1 pipeline to Germany is running at 20% capacity and the energy crises seems to be far from over.

Amidst the Russian – Ukraine tensions, the Ukraine has released their first ship with exports of 26,000 tons of grain since the start of this war which is a good sign towards alleviating global food security.

Technical:
Much like the greenback, the EUR/ZAR is also trading in an upward channel on the daily chart.  The pair has traded between a range of R16.82/€ and R17.17/€ ur this week. The pair opens today at R16.99/€ and is currently trading with little volatility. As the pair is sitting on a dynamic support and resistance line, the pair will either break this level and test a low of R16.84/€ next week, or bounce off this level and test a high of R17.20/€

UK MARKETS

On Thursday, the Bank of England released their interest rate decision announcing their largest hike in 27 years by 50 basis points from 1.25%, which was already priced in the markets. The Governor sounded very dovish as it is predicted that the United Kingdom is heading into a year of recession that may highly likely begin in the fourth quarter and last for possibly a year.

Governor Bailey forecasted that the UK’s inflation will peak at 13.3% in October 2022 and is highly likely to remain on the higher end of the scale all the way through next year. This will result in further increases in the cost of living for households, leading to lower confidence in the sterling and weaker consumer spending. As it stands, the economy is on the brink of a downturn, hence why the Pound sterling lost ground against the Rand yesterday. It is possible that the BoE will hike by a further 50 basis points at their next meeting in September.

Technical:
The GBP/ZAR has been trading in a sideways channel since the 13th of July 2022, with this week having traded between a low of R20.05/GBP and a weekly high of R20.51/£ . The Pound Sterling fell on Thursday after a dovish speech from Bank Of England Governor Bailey, from a high of R20.45/£ to a low of R20.16/£ . Today we open the market at R20.19/£