Another week passes by, and the tables turn again...
...somehow the Rand has turned it around from being on the ropes, to rallying back below R15/$ again.
It was a welcome change, with a week of good news.
However, the counts of where the market was expected to head were what really mattered, and this meant we could not take our eyes off of the expected trends over the next few weeks...
...even if there was good or bad news!
Let's review how it went...
There were some key moments which took the headlines this week.
Here are a few of them:
- Moody's outlook on banks - just when it seemed all feedback from Moody's was on a negative note, they put out a piece which was of great encouragement for investors ahead of SA's credit rating review in October...
- Trade War threats - US President Trump is not letting up on China, as he threatened even more tariffs just to scare emerging markets a little more!
- Fuel price hike - more woes for motorists and businesses alike, as they stare down the barrel at one of the biggest increases in petrol prices in history...
- SA farmland prices - the EWC debate is taking its toll in another sector as expected, as the price of farm land has dropped dramatically over the last few months. Surprised, anyone?
- Hurricane season for the US - the distraction and massive expenditure of the US on Hurricanes seemed to give the Rand a break, with Hurricane Florence hitting the East Coast hard
So, where did the week all start?
Actually, in very calm and cool fashion - the market opened around R15.20, and unlike previous weeks, the following few days were some of the most low volume and relaxed days we have seen in months...
...it was nice to catch one's breath again!
Along with that calm came some Rand strengthening, as per our expectations of retracing lower.
This was despite the news on Friday from the US:
- President Trump threatened to impose tariffs on almost all Chinese imports (totalling duties on roughly USD 470 billion)
- Combined with better than expected US job numbers...almost confirming that the Fed will hike rates for a 3rd time in 2018 later this month
So, fighting against the tide so to speak, the Rand made a good start...!
And while the tide of potential bad news seemed to kept flowing against the local currency, with the Chinese Yuan hitting 2 week lows following Trump's statements, and China saying they are prepared to retaliate if need be...the local currency just kept going!
And then on Tuesday, some good news arrived, bolstering the market further:
Mood's released a statement saying that they had upgraded the outlook on South African Banks from negative up to stable, which is a massive achievement. This means a positive start to the review of Credit Ratings, and maybe securing SA to stay above the feared #JunkStatus from Moody's - a decision which is coming next month.
And Ramaphosa tried to reassure that there will be no 'land grabs' as a result of the EWC debate, hoping to calm the nerves of investors internationally...
Along with that, July's local manufacturing data surprised at 1.6% month on month.
On the back of this, the Rand pulled some solid moves through Wednesday and Thursday, breaking as low as R14.62!
- The Brexit confusion continued this last week, as more discussions and meetings took place - with persons generally being unclear as to what is coming next. There now appears to be such danger on both sides, should there be a deal on Brexit or not. The confusion is just continuing to unravel, as the 2015 vote has plagued the UK ever since the day it happened...
This is supposedly going to be coming to an end, as the EU and UK are said to be planning a special summit to settle this once and for all...watch this space!
- Motorists are in for a shock in SA when the fuel prices are updated for the next month - the current prediction is for a more than R1.00 increase in fuel prices, per litre, as high oil prices, weak rand and poor economics are resulting in massive increases.
- More good news from Moody's arrived to help the week along, as they advised that South African Companies will avoid a Turkey-like crisis, due to a very different infrastructure that is in place. Deep and liquid local debt have reduced the need for SA firms to borrow abroad, which means that they are not as susceptible to a similar crisis.
- Farm land prices took a tumble this last week on the back of the EWC debate, and also the drought which Cape Town experienced. A full 32% drop has come over a period of just 8 months, which is a scary change of value. Investors are no fools - and the intended erosion of property rights is already starting to have an impact on the economy.
- As discussed last week, Minister Nene announced the Government is working on economic reforms to lift growth, to try dig South Africa out of the technical recession - to try and calm the nerves of Moody's and other agencies. Maybe abandoning a Communist agenda and theft of private property would be a good start!
As for the Rand, the tables turned a bit once again on Thursday and Friday, as we saw the market retreat back toward R15/$, losing over 30c in 2 days...
...it was a softer end to the week for the Rand as it closed around R14.95, but on the whole, a pretty successful one.
The Week Ahead (17-21 September 2018)
The Rand has dealt with early trade pretty well, pulling back after losing ground initially.
The local currency has some potential hurdles to overcome, an interest rate decision being one of them, with MPC sitting between a rock and a hard place, with the need for some relief needed to foster some much-need growth on the one hand, and inflationary pressures from Rand weakness and petrol prices on the other.
And, of course, that is apart from any new storms erupting from Trump's tweets...
The preferred wave count has been rather hazy the past month or so, but it is starting to show its hand and the next couple of weeks could be interesting indeed, if it plays out as expected.
We will be watching it closely - and suggest you follow along with us if you have any interest or exposure in the markets, with our 14 day free trial of our forecasts - just use the button below!
To your success,