Rand Report: Rand Slips Further Into Oversold Territory

  • Forex Analysis

Last week, the absence of significant South African data left the ZAR without a definitive local catalyst. The currency was swayed by global factors, such as the banking crisis in the US, and developed-market central bank interest rate hikes. Locally, the never-ending threat of loadshedding, and a possible grid collapse have continued to push the Rand into the red.

The US Dollar had another poor performance last week, with the Dollar Index (DXY) depreciating by 0.44%. The recent move to the downside came ahead of the US Federal Reserve interest rate decision on Wednesday, with market participants pricing in a 25-basis point (bps) hike. This came to fruition when the Fed bumped interest rates higher from 5.0% to 5.25% – in line with expectations.

The US nonfarm payrolls (NFP) data was released last week. The NFP report indicated that 253,000 new jobs were added to the US economy during April. This figure exceeded the 190,000 forecast and outperformed the previous reading of 165,000. The US unemployment rate also came due – moving down from 3.5% to 3.4% despite expectations of an uptick to 3.6%.

US PMI data also hinted at an increase in economic activity, with manufacturing PMI rising from 46.3 to 47.1 in April. Services PMI data also came due – moving higher to 51.9 from the 51.2 figure recorded in March.

Despite recent US Dollar softness, the EUR/USD pair remained flat. This was somewhat expected considering the European Central Bank’s (ECBs) mirror movement with regards to interest rate increases. The ECB hiked rates by 25 bps last week in line with market forecasts, from 3.5% to 3.75%.

Last week, Eurozone inflation print was released, with flash inflation rate figures reported at 7.0% for April, up from the prior 6.9% reading. The unemployment rate for March was released for the Eurozone, where unemployment declined from 6.6% to 6.5%.

Despite the recent pullback in developed market currencies, the Rand was unable to gain ground. The USD/ZAR pair ended the week 0.78% higher. After opening at R18.30 and topping out at the R18.50 residence level, the pair closed at R18.41 on Friday.

EUR/ZAR followed a similar price path, moving 0.68% to the upside. The pair kicked off the weekly trade at R20.17 and reached a high of R20.36 before retracting and closing off around R20.28.

The GBP/ZAR made a more pronounced forward gain, capitalising on recent market influences and appreciating 1.26%. The pair moved higher from the R23.00 level that has provided resistance over the last two weeks and reached an all-time high of R23.31. The pair ended the week marginally lower on Friday at R23.25.

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