Jittery Rand amid global tension

What a rummy old week for the Rand...

In fact, a rummy old month! June has been chaos from one end to the other!

Mr. Market never ceases to amaze, as the volatile 2019 continued.

The month has already seen a range of nearly 80c, with a low of R14.40, and a high of R15.17...

...as for the year, we are nearly at a R2 range, and we are not even halfway yet.

So what did this rollercoaster ride bring this time? Let's get into the full review!

Here are some of the big talking points from the week:

  • Gulf tensions - just what was not needed for oil prices, as 2 oil tankers were attacked in the Gulf of Oman on Thursday...
  • Trade War - Mexico escaped the chop giving the Peso a boost, but for how long will the threats continue before the next power play?
  • Forex collusion - back in the spotlight again was the incident that banks don't want to hear about...
  • Eskom's R300bn - the woes of the SOE have continued, with a fresh problem of their outdated coal stations needing to be replaced...
  • Gold's run - a volatile year has sent investors shy away from some assets, and this has been Gold's gain!

The Rand started the week on a good note, after the US Non-Farm Payrolls had disappointed badly against expectations of 185,000 - coming in at just 75,000.

And the Rand was actually on the front foot for the first half of the week, as it made a comeback from the slide to R15.17 level, slowly working its way down to sub R14.65 on Wednesday.

The Trade War news to start the week was good, that Mexico had escaped the chop...

President Trump suspended plans to impose tariffs on Mexican goods after the countries struck a deal on immigration. The dispute had threatened to raise costs for U.S. companies and consumers and expand a global trade war that already includes China.

Any sign of the trade war coming to a conclusion was good news for emerging markets...

...only for Trump to then start the next attack, saying that if President Xi of China does not attend the G20 summit where they are expected to meet, more China tariffs will go into effect!

If Xi refuses Trump will slap another 25% tariffs on $300 billion of Chinese imports.

It never seems to stop, but the Rand managed to keep the upper hand through to Wednesday...

This was on top of the news that Eskom would need to spend R300 billion to be fully compliant with the nation’s standards (Eish!). Greenpeace Africa's view was that Eskom should quit coal-fired generation over the next 20 years, even as the beleaguered power utility presses ahead with new plants.

Eskom didn’t respond to a request for comment...and that was no surprise. The movement toward renewable energy leaves them between a rock and a hard place:

  • They need to up production, and increase maintenance at the same time - a tough ask
  • The only way to do this is to build more plants, and increase efficiency of maintenance
  • At the same time, the majority of their efforts are toward a non-renewable energy source
  • And moving away from that would require serious investment of capital - which they do not have...
  • Eskom needs a lot more than just a reform, that is clear!

And on the back of all this, on Wednesday, the Rand's fortunes changed...


And then in other news across the globe:

  • What was not needed for jittery oil prices was something to shake up the market all the more - and that was unfortunately, exactly what came! On Thursday, reports surfaced of two tankers near the Isle of Oman who had been attacked by some kind of bomb or mine. One of the tankers was operated by a Japanese company, and it did not take long for the Trump Administration to put the blame squarely on Iran. With that, Oil shot 4% higher in a matter of hours.

  • The old Forex Collusion case made its way back into the spotlight this last week, with Competition Tribunal ordering the Competition Commission to revise its referral against banks implicated in the price-fixing case. This dates back to the 2017 scandal where it was revealed as to 23 banks colluding together to affect forex prices, with all kinds of dirty work going on to make everything happen how they wanted it to. This one is long from finished!

  • The damage done from last week needed to be patched up, as SARB's position was still not clear to all despite recommendations from all quarters saying don't touch what isn't broken! Professional bodies said to respect its independence, and analysts saying that independence threats are hand grenades with a pin out for SA. Ramaphosa tried to calm the ship by calling for ANC policy certainty, but without being overly committing toward clarifying the situation. The ANC rifts and confusion continue...

  • In international news, the race to be the new UK prime minister has really begun with Boris Johnson, Andrea Leadsom and Jeremy Hunt leading the pack. The upcoming selection process will yield results that are imperative to how the ZAR will react to the Pound. Also in the UK, released manufacturing and industrial production figures came in much lower than expected at -3.9% and -2.7% respectively for the month of April. It has already been a very distracted year for them in the midst of the Brexit turmoil.

  • Global markets have been limping along all over, but for Gold and other markets like cryptocurrencies, it has been a fantastic few months. Gold has hit a 14 month high, while Bitcoin has jumped $5000 from its low in December 2018, and is now trading over 8000 USD.

As for the Rand, it idled its way toward the end of the week, closing around R14.80 to the Dollar...

...the EURZAR and GBPZAR had already broken lower to R16.60 and R18.65, but the stubborn USD was holding on. And then that was the wrap...

The Week Ahead (17-21 June 2019)

This week sees two big interest rates decisions (Fed and BoE) that could provide some triggers for big moves, but of course, there is always more than that to prompt some action, be it the next Trump tweet (or trade war move), ANC policy announcement or Eskom dilemma.

For us, we will merely keep observing the markets from an Elliott Wave analysis point of view. At present, the market is continuing to move in line with our latest short term wave count, but we still need some levels to be broken to confirm the preferred larger degree wave count.

And we suggest you join us

Simply use the link below to get our very latest roadmap for the Rand for the next few days, weeks and months ahead against the Dollar, Euro and Pound, based on the latest Elliott Wave count.

And get our bi-weekly updates for the next 2 weeks. All on us... GRATIS...

Get Immediate Access Here

I look forward to being of service to you - and to saving you money, time and stress.

As always, appreciate your feedback and thoughts.

To your success~

James

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