And we are back with our first Rand Review of 2020...
Trust you are feeling refreshed and rested - and ready and raring to tackle the new year with vigour!
It was a very interesting period for the Rand during our absence, as we saw the market trade down as low as sub R14/$, despite all of the global tension and pressure.
This last week was no less interesting - with the US & Iran at each other's throats, markets worldwide were very volatile!
And that was before even looking at local developments...
...so we have plenty to cover - let's get into the full review as to how the Rand performed!
Here were some of the biggest talking points:
- US vs Iran - the US drone strike the week before sent tensions sky-high, with no sign of the situation de-escalating...and it continued this last week
- SA Growth predictions - the World Bank gave some scary news on future growth expectations for SA
- Trade War slows - it looks as if January 15 is D-day, with Phase 1 Deal waiting to be signed...
- Eskom - back in the news...and once again for all the wrong reasons. Production almost half what it should be, and load shedding is back!
- Oil, Gold & Bitcoin - some of the most interest weeks for markets in the wake of the US-Iran conflict
When the market opened last week, we were sitting around R14.25 to the Dollar, with the Rand having lost ground in the buildup to the weekend. The US against Iran conflict was very much in the world's eyes at this point in time, following the deadly drone strike from the US.
The situation between the US and rogue-state Iran is complex, but Trump had little choice but to take decisive action following the attack on the US Embassy in Baghdad.
Which he duly did - in taking out Qasem Soleimani, the mastermind behind Iran's operations and influence in the Middle East, and a renowned international terrorist of the magnitude of Osama bin Laden, if not more so.
Trump went further, threatening further action if Iran retaliated...
...and with this, investors dumped dumped risky assets and flocked to safe havens.
Gold was up more than 1% and oil by $3 over concerns of future supply if war were to breakout in the Middle East. Things simmered over the weekend, as Iran threatened to retaliate. But things seemed a little quieter into the new week...
...that was, until Tuesday, when Iran sent missiles in to a US base in Iraq.
No casualties reported, but tensions escalated further.
Safe havens like Gold soared to new highs, and interestingly enough Bitcoin was back over $8000. Oil was choppy and all markets other were taking rather a pounding!
The Rand also took off, hitting as high as R14.44 following this news, as it seemed that war was imminent with everyone expecting the worst...
And then it all calmed down again, with Trump announcing that: “Iran appears to be standing down, which is a good thing for all parties involved”
The Rand recovered back toward R14.11 over the coming days, and all seemed 'well' again...for the moment!
And then in other news:
- It didn't take Eskom long to welcome Saffers to the new decade with what marked the end of the previous one: Load Shedding! (as someone said, "The person responsible for turning off and on the lights was back from leave"): Power cuts had already had serious effect on business during the course of December. Now it seems that 2020 is not going to be any better, with lack of maintenance finally coming to a head, with multiple breakdowns coming one after the next. In the first week of 2020, Eskom produced just 56% of the expected/required output. If this continues, serious issues face SA in the new year.
- And following on that was World Bank's predictions for growth in SA in 2020...and they did not make for pretty reading! Their predictions indicated a less than 1% growth rate during the course of the year: a sorry looking 0.9% is not going to cut it for a country which is urgently in need of a turnaround and job creation. Eskom is front and centre to this whole situation - without power, how can business turn around? The restructuring of Eskom by its new CEO is going to be absolutely crucial to this that it is done speedily and efficiently...!
- In other news, Brexit is now bearing down on us with no apparent possibility of another extension.Following Boris Johnson's landslide victory in the general election, things have sped up, and the deadline of end of January 2020 is almost upon us. The MPs have voted to ensure that this will go ahead, and although there are still some hoops to jump through, it is beginning to look inevitable that this is it! The spin offs for other countries? Well, the US is rubbing their hands at the chance to negotiate another more favourable trade deal. As for SA, here is what will happen following Brexit according to Fin24.
- Phase 1 of the Trade Deal appears to be coming onto the table shortly, after many months of back and forth. Trump's indications have been that the deal will be signed on Jan 15 or shortly thereafter, but chances are that the Trade War as a whole will drag on through the course of 2020...uncertainty has marked the whole Trade War, and it doesn't seem to be ending anytime soon.
- Just when it appeared the Iran situation was calming down, details emerged that the reason a Ukraine passenger 737 plane crashed in Iran on Tuesday was because Iran shot it down 'by mistake' with a missile. This resulted in the death of every single person on the flight. Absolutely horrific...and there will surely be consequences for this!
But Friday brought a host of activity:
- US Non Farm Payrolls - which were expected to be coming in at 164k, but underperformed at 145k, with unemployment sitting firmly at 3.5%. This triggered the Rand to trade lower toward R14.17...
- ...only for good work to be undone with Eskom load shedding continuing over Friday & Saturday, despite promises from Eskom chair Jabu Mabuza. Mabuza then handed in his resignation on Friday evening.
On the back of this, we saw the Rand weakening as high as R14.36 on Friday evening...
A rather sorry end to what had been a good week, but overall the ZAR only closed 10c weaker than where it opened - despite the tumultuous week!
The Week Ahead (13-17 Jan 2020)
Well, quite a week last week to jolt us into action...what will this week bring?
With US-Iran tensions still jittery, it will be interesting to see if things start settling down. Trump has certainly shown Iran that the US is not to be taken lightly.
And then, we also have the Brexit countdown, as well as an ECB Meeting and US Retails sales. And domestically, there is an interest rate decision.
And then of course we have Eskom...
Where does this leave the Rand?
As usual, we will be seeing what the Elliott Wave patterns are telling us, not the news. While the market remains below key levels, the bias is initially for more Rand strength...but it is unlikely to be one-way traffic!
To get a look at what we are speaking about, use the link below to get access to the latest forecast.
(You don't want to regret not having done so this time next week...)
Look forward to hearing from you.
To your success~