Market Recap

Looking back at last week, we saw a mixed bag of figures, the main highlight being the U.S. Federal Reserve Minutes and elections in the United Kingdom and France. The Chinese Caixin Manufacturing PMI showed that output increased marginally in June, with E.U. tariffs on Chinese E.V.s kicking in despite ongoing debates between the E.U. and China. Considering the Federal Reserve Minutes last week, we note the Federal Reserve is set to cut rates within this year but remain data-dependent over the medium term. At present, the Fed Watch Tool by CME forecasts that there is a 66% chance that the Fed will cut rates at the September meeting,

As we kick off the week, France and the U.K. have new governments. The Labour Party, led by Keir Starmer, took the win after more than a decade in the U.K., and France welcomed a coalition of socialists, ecologists, communists, and France Unbowed as the NFP (New Popular Front) secured most seats, but short of 289 which prevented a majority.

South Africa

While the GNU has been a positive breath of fresh air for the market, the ZAR remains heavily dependent on the market risk appetite reflected in international developments. The rand will come under pressure between Tuesday and Wednesday as the U.S. Federal Chair Powell is set to testify in front of Congress. Diving into vehicle sales, we note that inflation pressure continues to pressure new car sales. However, we don't see the SARB reacting aggressively to action by the Fed in the coming months, which will support the rand over the medium term because of the interest differential.

Technical Analysis.

The ZAR took advantage of U.S. data points last week, moving almost a per cent stronger than earlier. This morning, we're seeing momentum fading as traders look to reposition ahead of Powell's testimony starting tomorrow. If Powell's comments confirm further rate cuts, we will likely see the price hover around 18.10. However, as the GNU settles locally, expect headlines to drive impulse pressure onto the ZAR, with the weakest levels testing 18.52.

Hedge Analysis Snapshot

The data below emphasises hedge scenarios based on a USD50,000 invoice on a 60/40 split vs. an outright hedge

On-Chain Review

There has been a major sell-off in the BTC market, with price action finding support around $52k. As mentioned in April, derivative uncertainty remained firm after BTC's halving. It does look like the market is pricing in uncertainty around the U.S. presidential election, a significant play because a win for the Democrats may see continued pressure from the SEC onto crypto providers.

The Realized Cap for Bitcoin offers a moment-in-time representation of the cryptocurrency's true value, accounting for the last transaction price of each coin. By reflecting the values at which coins were last transferred on the blockchain, the Realized Cap goes deeper than standard market capitalization, which only considers the current market price. This provides a more accurate depiction of the value that Bitcoin holders possess. Being a contrarian indicator, we can gauge the market sentiment of short and long-term holders.

It represents a potential downside in price action over the medium term, seen by past trends shifting from orange to yellow after market price tops.

Insight By: Shiven Moodley (COO & Macro Strategist)