pixel

URGENT ALERT: Please beware of fraudulent WhatsApp groups and other groups across Social Media pretending to be affiliated with Anchor and Anchor staff members. Do not engage with these malicious and fraudulent groups in any way. Please direct all queries to invest@anchorcapital.co.za.

Anchor rand view: ECB signals a more dovish stance

Figure 1: Rand vs US dollar gauge

Source: Anchor

Central banks are coming to the fore once again. On Tuesday (18 June), the European Central Bank (ECB) surprised the market by signalling an increased likelihood of rate cuts (although rates are already at record lows) and stimulus measures. The market is also theorising that the tone from the US Federal Reserve (Fed) at the end of its two-day policy meeting, scheduled for later on Wednesday (19 June), will turn even more dovish. While we do not expect the Fed to cut interest rates, we do anticipate that it will prepare the market for a rate cut in the second half of this year. This marked shift in monetary policy has been positive for emerging market (EM) currencies and, on Tuesday, the rand was a clear outperformer, strengthening by c. 2% against the US dollar on the day.

However, we note that the local currency still has a significant risk premium associated with it. All eyes are on the State of the Nation Address (SONA) by President Cyril Ramaphosa, which is scheduled to take place on Thursday (20 June). There is some excitement that he will give further clarity on the bailout and turnaround plans for Eskom. However, we fear that the market might be getting a little ahead of itself in terms of what it is hoping for and there is some risk of disappointment, in our view.

The rand is still too weak against our models, although we do think that it might remain so for quite a while. We will continue with our slight underweight stance towards the US dollar for now.

Figure 2: Actual ZAR/$ vs rand PPP model

Source: Bloomberg, Anchor

OUR LATEST NEWS AND RESEARCH

INVESTING IN YOUR NEEDS

Submit your details and we’ll give you a call back to assist and advise you on your investment.

SUBSCRIBE TO OUR NEWSLETTERS

Subscribe to our newsletters to receive regular market commentary, research and updates from the Anchor team. Select between our Individual or Financial Advisor newsletters by selecting the relevant tab below.

WEBINAR | The Navigator – Anchor’s Strategy and Asset Allocation, 2Q24

Anchor CEO and Co-CIO Peter Armitage will host the webinar, provide an introduction to current global and local market conditions and give his thoughts on offshore equities. Together with Head of Fixed Income and Co-CIO Nolan Wapenaar, Pete will also discuss Anchor’s strategy and asset allocation for 2Q24, focusing on global equities and bonds. In addition, Fund Manager Liam Hechter will provide insights into local equities, highlighting some investment ideas; Global Equities Analyst James Bennet will discuss Ferrari and give an update on Tesla, and finally, Analyst Thomas Hendricks will participate in a Q&A with Peter, explaining the 10-year US Treasury to attendees.