Choppy waters for the Rand, as the short week saw the Rand bouncing around R14/$...
The market has mostly tracked sideways between 13.90 and 14.25 or so for most of April without any clear direction - almost like it has been treading water...
...but that is not likely to last long as we head further into Q2 of 2019!
It is likely to be an interesting quarter, that is for sure, with elections in just a couple of weeks...
...and the Rand waiting for something to provide a trigger for the underlying sentiment to get the Rand trending once again..
There was some of that sentiment building up this last week, so let's take a look at what all happened...
Here are some of the biggest news articles from the week:
- Eskom on the up? - more positive news began to filter into the public space, with promises of a better remainder of 2019...only for more surprises at the end of the week
- Mueller's Russia report - the long awaited report on President Trump's collusion was finally made public, and was met with huge interest globally
- Reserve Bank - the rows over independence have continued, with strong views being aired by Governor Kganyago
- State Capture damage - as the can of worms continues to be opened, the more we see how many things the worms had already eaten...
- Busy economic data week - lots of results and figures were released globally from SA, US, UK and China.
Eskom was certainly the biggest talking point of this week as the Rand opened around R13.90 to the Dollar.
The effects of load shedding have been devastating for many businesses, including banks. FNB's CEO made no bones to say that "it's tough" to deliver services when there is no electricity - and that is for a company which has a lot of its services delivered online. As he said, "Every day of load shedding takes so much momentum out of an economy that is struggling to keep its head above water."
Eskom needs a plan, and fast.
And that was when some better news started to arrive:
- The new Eskom Kusile Unit 3 is up and running and has begun producing power - a full 8 months ahead of schedule - although at the testing stage now, this is excellent news.
- Then Eskom's CEO came out and said that “The days of surprises are over. We just have to speed up the process of turning things around." While this is a big task, it appears that some progress in being made, and 'brighter' days are coming for Eskom.
The concern is always that these plans and general turnaround can be implemented fast enough. The turnaround is not impossible, but it has to be done at top speed to save the sinking ship.
Anyway, that was pretty bright news, but it didn't last long, as we will see later...
This was before the news of Special Counsel Mueller's release of the report on Russian Collusion with President Trump, which arrived on Thursday.
The long-awaited report was meant to be the heralding of the Democrats sabotage attempts over the last 2+ years, only to turn out to be one of the biggest flops!
In general, it appeared as if the President is exonerated, despite the report saying that it neither condemns nor exonerates him. The other side of it is the amount of rifts, lies and deceit that goes on in the background of a President's office...
...but the bottomline being no proof whatsoever of collusion, despite there being multiple opportunities where Trump "could" have colluded.
So, it would seem a victory for Trump, but don't expect that to be the end, with the Democrats hell-bent on hurting, or better, ousting Trump at all costs...
Generally, this would be expected to be Dollar-positive news. But the net-result was little to no reaction at all from the USD - confounding economists yet again!
There were some other headliners from the week:
- The Reserve Bank was again in the news over its independency, as Governor Kganyago hit out at the Public Protector for a "flagrant disregard of the law" in ordering the constitution to be changed in 2017 to alter the mandate of the SA Reserve Bank. He has had a tough time of it as governor, as the attacks on its independency have not been difficult to hold off - on top of that, there is the damage from state capture. It was announced this last week that the damage wreaked by state capture was even worse than anticipated
- Economic figures were released worldwide for SA, USA, UK and China, giving plenty for economists to talk about. In SA, the retail sales came through higher than anticipated, at a 1.1% increase. In China, it was reported that their GDP had grown by more than 6% in the first quarter of 2019, and this would be a good boost for emerging markets. Consumer inflation in SA ticked up to 4.5% from 4.1%, giving a few jitters for SARB once again. The US continued to make progress on their trade deficit as it narrowed further to $49.4 billion in February. And lastly, oil prices are sticking strongly above 70 USD a barrel - expect more petrol price increases while this continues...
- SA's debt repayments are beginning to become a real problem, but Moody's issued a statement saying that while the costs are rising, they are still "affordable". This is important news with Moody's credit agency continuing to give SA a long rope when it comes to downgrading the sovereign credit rating. For now, it looks like they are continuing to be patient - but for how much longer?
- And just when things were looking better for Eskom, and there had been promises of “The days of surprises are over", there was news that the SA government was forced into an emergency aid payout of R5bn to Eskom, in order to help them meet obligations. These emergency funds are not exactly spare funds sitting around, and will just increase government debt...and until the loan comes throug from the China Development Bank, these payments will have to continue. All the time, the worries over blackouts and load shedding are tearing apart the economy, with SARB warning that these "could cut growth close to zero"...
- Lastly, EU have granted the UK a six-month extension to Brexit. The date is now set for 31 October – leaving Brexit back at the drawing board.
- Having the market move against you before you have taken action.
- Doing something too early and missing out on the market moving in your favour.
- Both the above can leave you with huge regrets and frustration - even anger...not to talk about a poorer bank balance.
The Rand ended its up and down week closing around R14.07 to the Dollar, with a short week and long weekend, as banks closed for Friday's Easter holiday. And that was the wrap!
The Week Ahead (23-26 Apr 2019)
It has been a bad start for the Rand on Easter Monday, with the market breaking out of its trading range to push up towards R14.20/$.
This week we have some potential market-moves in terms of economic events, with the Fed's Interest Rate Decision & Monetary Policy Statement being probably the highest impact one, while locally the Balance of Trade results could also provide some trigger for a move.
Of course, we are in countdown for elections, which could also have some impact on overall sentiment, apart from shock events internationally like the Sri Lankan bombings that killed hundreds of the weekend.
So where to for the Rand?
From our analysis, the break higher today has confirmed which one of our short term wave counts is likely playing out, and we will be watching movements closely the next few days.
If the current wave count plays out, the Rand's moves over the next few days and weeks could take many by surprise...
...this is certainly not a time to have Rand exposures without a proper roadmap and a strategy (plan of action), so that you can prepare and take action at the right time...
That is why I want you to be prepared!
And why I would urge you to take advantage of my 14 day free trial today (no card needed).
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