Rand slightly stronger but possibly under pressure

The rand started this week marginally stronger at R13.55 to the US dollar.

But this week will see not only the US federal open market committee (FOMC) meeting on Thursday but also the release of SA’s current account for Q2:15 today (Tuesday) and retail sales data for July tomorrow (Wednesday) said the Standard Bank.

The bank also suggested that the 13.50–14.00 range seems to offer the likely key support and resistance levels.

“No doubt,” it said, “the focus this week will be on the FOMC meeting. The question of whether or not the Fed will raise rates at the meeting will be hotly contested over the next few days. The market is pricing in a 26% probability of a hike.

“We maintain that some long dollar positions against emerging market (EM) and/or commodity currencies may actually be unwound ahead of the event to reduce exposure. This may well add to rand strength going into the FOMC meeting.”

The SA Reserve Bank (SARB) releases the September Quarterly Bulletin today at 10h00, which will shed light on Q2:15 macroeconomic data. Amongst the key data in the Bulletin, the Q2:15 current account data will be watched closely, according to Standard. Bloomberg consensus expectations pencil in a compression of the deficit to -3.7% of gross domestic product (GDP) from -4.8% of GDP.

Stats SA releases the retail sales data for July tomorrow at 13h00. According to the Bloomberg consensus, retail sales growth is expected to have moderated to 2.4% year-on-year (y/y) in July from an increase of 3.5% y/y in June.