Bank of America Posts Strong Q4 2024 Results, Shares Rise 
Gold Prices Fall Amid Rate Jitters; Copper Steady as China Stimulus Eyed 
Indonesia Surprises Markets with Interest Rate Cut Amid Currency Pressure 
Stephen Miran Resigns as White House Economic Adviser Amid Federal Reserve Tenure 
China’s Growth Faces Structural Challenges Amid Doubts Over Data 
UBS Predicts Potential Fed Rate Cut Amid Strong US Economic Data 
Australian Scandium Project Backed by Richard Friedland Poised to Support U.S. Critical Minerals Stockpile 
U.S. Banks Report Strong Q4 Profits Amid Investment Banking Surge 
U.S. Stock Futures Edge Lower as Tech and AI Stocks Drag Wall Street Ahead of Key Earnings 
US Futures Rise as Investors Eye Earnings, Inflation Data, and Wildfire Impacts 
China and Uruguay Strengthen Strategic Partnership Amid Shifting Global Order 
Global Markets React to Strong U.S. Jobs Data and Rising Yields 
Urban studies: Doing research when every city is different 
Indian Rupee Strengthens Sharply After U.S.-India Trade Deal Announcement 
Lithium Market Poised for Recovery Amid Supply Cuts and Rising Demand 
S&P 500 Relies on Tech for Growth in Q4 2024, Says Barclays 
S&P 500 Rises as AI Stocks and Small Caps Rally on Strong Earnings Outlook 
Due to global recession fears and rising risk aversion yesterday brought a further sell-out for many EM currencies. The rand was amongst the biggest losers over the past days and reached new lows against USD and EUR. This is due to investor concerns that the country could slide into a debt crisis in view of the looming global recession and the immense domestic challenges. This is also reflected in the continued rise of credit default swaps (CDS) which had already risen ahead of Moody’s rating downgrade. Clearly confidence amongst investors is dwindling that President Cyril Ramaphosa’s government will be able to cope with a crisis of this magnitude. In view of the overstretched public finances the Minister of Finance signalled that he would request financial support from the World Bank or the International Monetary Fund if his country was to run out of funds to fight covid-19, but that negotiations had not started yet. The country resembles a car screeching through a narrow bend on two wheels with the precipice on the far side. It will take a lot of skill to manoeuvre out of that. Hardly surprising therefore that ZAR investors are getting cold feet. An end of the ZAR losses does not seem in sight against this background.
There are some technical positives for ZAR, which under normal circumstances may be sufficient to stabilize the currency, but amid end-of cycle concerns are probably not a good guide.
For completeness, we review valuation and positioning below. The medium term outlook for ZAR remains very negative based on weak growth, prospects of much lower carry and a negative BoP dynamics. Yet, our risk appetite index has reached extreme low levels and ZAR is starting to screen cheap in our BEER FV model.
As such we took profits on our bearish trades. Lacking directionality though momentum to keep USDZAR above 18.00 levels.
Consider a RUB – ZAR RV trade, supported by the earlier screener on skews: Sell 3M delta-hedged USDRUB 25D call @10.9/11.3 and hedge it with 3M delta-hedged USDZAR 25D call @16.325/16.725, equal vega. Courtesy: JPM & Commerzbank
