It was an uncertain and media driven week last week as a host of Federal Reserve Governors were paraded out to convince everyone of the sound job the Federal Reserve is doing to ensure the supposed “soft landing”. The US debt market is however calling the Fed’s bluff given that the US 10-year yield spiked to 16-year high last week of 5.00%. The more the governors babbled, the more the US bond market sold-off. The sell-off in long-term US treasuries is creating an intimidating risk-off investor climate which is putting tremendous strain on the US financial sector. China also released a host of GDP and production figures last week which claim that the Chines economy grew by 4.9% y-o-y in the 3Q2023.
The rand managed the storms of the SA CI print and the latest SARB monetary policy review relatively well last week. SA CPI for September came in higher than expected at 5.4%, year-on-year, up from 4.8% in August while the SARB monetary policy review highlighted the reserve bank’ uncertainties towards inflation stabilization. The SARB also clearly indicated interest rate cuts over the near term is highly unlikely.
The headlining events on the data calendar this week is the European Central Bank (ECB) interest rate decision, where the bank is expected to hold rates at 4.50%, and the US GDP print for the 3Q2023. The US GDP figures are expected to come in at a q-o-q growth rate of 4.1%.
The first chart or the week is the US 10-year yield. It is uncertain from where the US bond market will find relief but a continued sell-off in long-term treasuries will push the yield to the 2007 high of 5.30%. Long-term bond yields have now climbed more than 50% since April 2023…
The broad-based dollar index (DXY) remained range bound last week despite the turbulence in the bond market and the on-going geopolitical tensions. The DXY is trending lower and the key support levels to watch sit at 106.00 and 105.50. We currently have the 50-day MA at 105.10 which also serves as a strong support.
Looking over at the rand, the USD/ZAR pair is still dancing with the 50-day MA rate at 18.97. A break above will see the pair test the critical resistance at 19.15, while a break below will see the rand pull the pair onto the critical support rate at 18.70. For now it’s still too tough to call whether the rand will be able to make a substantial recovery in the last quarter of the year.
Over to commodities and the 50-day MA has held its ground to pull the price of brent crude oil back above $90 per barrel. A re-test of the high at $96.00 seems imminent.
