Well, what a week. Yet AGAIN, the Rand turned the tables on the Dollar.
This was despite the Trade War...
...despite the volatility surrounding SARB's interest rate decision
...and petrol price hike fears
...despite the new mining charter
All these things are generally Rand negative - yet somehow, it turned out to be Rand positive! A tough one for economists to explain!
Let's take a look at how it all played out.
In a busy and eventful week, there were a lot of big headlines:
- Trade War to the fore - just when it looks like it is dying down again, the trade war kickstarts into 5th gear and is back at full speed! The US and China were back in a deadlock of tit-for-tat this last week, making frail economies panic all the more...
- Rate Hike - all eyes were on SARB...what decision where they going to make as they try to balance a host of different issues all playing off against one another, as they were faced with the difficult question of SA's interest rates.
- Ramaphosa's speech - the stimulus package for the SA economy was a closely watched event, as the President tried to combat the technical recession situation...
- SA CPI - unexpectedly, there was some good news as the inflation slowed to 4.9%, compared to the 5.1% in August.
- SARS fines - with targets having been missed for the entity, they set about playing the catchup game by announcing they were going to be fining companies for missing tax return dates. The total number of firms identified was around 300 000...!
- Mining charter - while this discussions seems to keep dragging on forever, some more concrete news on the subject landed this week...
It did not take long for the focus of the week to flip over to the USA on Monday, as they attempted to cleanup after the destructive hurricane Florence had come through. However, this was not what got attention:
It was the next move of the Trade War.
Monday: U.S. announces 10% tariff on $200 billion of Chinese exports effective Sept. 24 until the end of 2018, to rise to 25 percent thereafter.
Tuesday: China hits back - a retaliation on $60 billion of U.S. goods to become effective simultaneously with the U.S. duties.
This war has not helped emerging markets at all.
It should have been a bad omen for the Rand.
Along with the MPC meeting to discuss the interest rate on Thursday, and all the speculation around this, it should have been a volatile few days for the Rand...
...but it wasn't quite so.
In fact, the Rand took it swimmingly, driving down to below 14.65...
So, that took us through to Thursday. All the build up to 15:00 on Thursday was the Interest Rate Decision by the MPC.
All options were on the table: decrease, hold or increase
Nobody quite knew what was coming. The combination of the weak Rand, rising petrol and oil prices, meant that MPC was in a sticky situation. Expectation were for them to follow follow Turkey's decision to try cover for emerging market woes by raising the interest rates...
...but that didn't happen, and the rates were held at 6.5% - a wise decision.
As for the Rand?
It strung together another STRONG day, taking the rate to sub R14.30/$ in the evening!
What a week it had been, with just one more day to close out an incredibly solid 5 days.
Some of the other headlines from the week:
- One of the clear indications that the US is on top in the Trade War against China is the way that the US markets have been performing with a strong Dollar, and this past week, the S&P 500 hitting its highest ever level. China on the other hand, has not had such a good run at all, with the Yuan losing ground, and really battling against other majors. With China being the bigger exporter, the advantage was always on the US's side from the start, and for now, it is being driven home.
- Ramaphosa's stimulus package ideas took all the headlines on Friday, as he revealed his plans going forward. It was a case of "doing more with less" for President Ramaphosa, as the old saying of "money doesn't grow on trees" held true! A difficult economic situation is far more difficult to grow from, than a stagnant position with a stable economy...
- The Mining Charter has been another one of the contentious issues in the last few months, and now it finally seems to be moving forward again. The cabinet has approved a revised Mining Charter, but the text of the revised version has not yet been released to the public. This is an integral part to Ramaphosa's stimulus plan, and it remains to be seen what comes of this.
- Affirmative Action (AA), another subject of much debate has come into question this last week. The Chapter Nine body has found that the country's policy on AA and employment equity is unconstitutional - surprise surprise! Based on this, there is going to have to be a relook at the policy - so we will be watching what comes as a result of that...
- SARS is on the hunt for more funds - and they are coming after the persons they like least: the non-payers. They have announced that they have 300 000 corporates in their sights, and intend to be going after them with fines as a result of the non-payment of their taxes...
As for the Rand, it held strong to close out the week, and despite a few blips during the day, when the US close came, it was trading around R14.30. An incredible turnaround since the beginning of the week!
The Week Ahead (25-28 September 2018)
With National Braai Day taken in earnest, the Rand also decided to take some time out ending the day pretty much where it started.
But the balance of the week is likely to be more volatile, with several key fundamental events due that could provide triggers for large moves.
The question is: In which direction?
We have several key levels we are watching to confirm the preferred wave count.
To see what these levels are - and where the market could head if they are triggered, simply join us for the next 14 days for free.
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To your success,