What was set to be a quiet week of market activity with the Rand on the front foot was once again turned on it's head.
How is it that the Rand and South Africa are never far from volatility and controversy?
This week it was a change from the day-to-day market triggers...
...and yet a return to the same old one which has plagued the market for years: Cabinet Reshuffles.
Out of the blue, Ramaphosa initiated his Cabinet Reshuffle on Thursday evening, sending shockwaves through the markets.
What a week it suddenly became...
...but let's start right at the beginning.
And go through the whole week's activities!
These were the biggest headlines from the 5 days:
- Cabinet Reshuffle - it had to be #1 on the list, as market chaos ensued following Ramaphosa's directives
- Mboweni Exit - the fiesty finance minister was gone of his own accord, as he put in resignation...rather a shocker, but not maybe unexpected
- US Jobs - inconsistencies in data continue, but a huge recovery in Friday's numbers increased confidence that the recovery is underway
- Lockdowns Looming? - risks abound, as all signs pointed towards Biden initiating more lockdown restrictions...
So, to begin the week, the Rand was actually on the front foot having gained all of 40c the week before, and looking to add more to the tally. Opening at R14.60, it was a much better position than where it had been around R15/$ the week before.
And as the week began, the Rand stormed into the early lead, pushing sub R14.45 on Monday, sub R14.30 on Tuesday and eventually testing toward R14.20 by Wednesday.
On Wednesday, we released a fresh update on the USDZAR, giving the outlook for the next few days. With the market at R14.36, our Elliott Wave based forecasting system expected a bottoming out between R14.35-14.10, before moving to R14.50-14.70, with a move higher confirming further upside (click to enlarge)
This was a big call after how the first half of the week had gone...
...so far, it had been the Dollar's loss was the Rand's gain, as the ZAR really got some traction as the USD endured a tough time.
But everything was about to change on Thursday evening...
...with the Rand reading around R14.35, the news hit - Ramaphosa was reshuffling the cabinet, for the first time in his tenure.
The biggest news was Tito Mboweni - he was out through resignation, to be replaced by Enoch Godongwana. And somehow Bheki Cele missed the chop.
But there were many other changes too, as the cabinet was significantly shaken up. Here's the full list from News24:
But what happened on the back of this news...?
Well, despite persons having the view that Enoch Godongwana was a stable and solid solution to the finance minister job, one of the more influential as regards the Rand, the markets did not agree (but not quite to Nene / Des van Rooyen levels).
The Rand exploded to R14.73/$, but then recovered somewhat back down to R14.45 by Friday morning.
But then all too quickly, the Rand was back up and testing R14.70 by the afternoon, as the US Jobs report came out.
Payrolls exploded by 943,000 as the unemployment rate really reversed it's uneasy trend, moving to 5.4% now in the USA.
Hopes of a full recovery soon are there, but risks abound, as we will go into now...
...but for the moment, just take a look at the level of volatility endured by the USDZAR this week!
And then in other news:
Some of the main risks that remain for the US recovery (and really the worldwide recovery) is the spread of the so-called 'Delta Variant'. Cases are supposedly picking up fast in the USA again (how are these being measured?), and it is all doom and gloom from Biden and Dr Frauci as both look as if they are trying to prepare the public for yet another lockdown by scaring everyone into accepting more freedoms being restricted. If this happens in the USA, watch for the trend around the world. This stifling of economic growth is not what any economy needs right now, and government's cannot continue supporting economies by taking on more debt - as persons lose jobs, businesses and livelihoods through throttling lockdowns. Where is the end of this? Economic ruin is the only end if the lockdowns continue, it is as simple as that. There is already huge protests happening in Australia and Europe against these draconian measures.
A quote seen recently puts it as it is:
"Quarantine is when you restrict the movement of sick people. Tyranny is when you restrict the movement of healthy people."
- Mboweni's exit from the position of Finance Minister is one of real concern for many. While a communist in his intents and purposes, he clearly had a grip on the economy to some extent, especially when it came to SOEs, and went head to head with Pravin Gordhan multiple times in an attempt to stop the endless flow of taxpayer funds into the black holes of companies like SAA. So now, will Enoch (a little write up on him here) have the ability to rectify things, with a steady hand, while encouraging growth, stopping corruption and managing to rebuild post-lockdowns, all with limited resources? It remains to be seen. Think-tanks have given their view that there will be more looting and rioting if the economy is not grown…
- Risks are real for countries who don't grow their economies and pursue communist ideas, as we see Venezuela's turmoil continuing - now slashing 6 zeros from their currency as their financial woes continue. Every action has an equal and opposite reaction - Newton's law holds true, and sometimes when it comes to policy and Communist ideas, it takes years before results are seen. Now in Venezuela, it is blatantly obvious for the world to see what the end is…
- In other economic news, local PMI data released was showing the effects of July, where manufacturing activity tumbled to 46.1 points in July from 51.0 points in June following the recent civil unrest and lockdown level 4. In the EU, recovery is in full swing as unemployment rate improved for the month of June, GDP jumped to 13.7% YoY for the second quarter while inflation remained stable. US Fed members stated that conditions for an interest rate hike could possibly be met in late 2022,. Adding that the tapering of their current bond buying programme (QE) could come into play sometime this year, depending on the labour market recovery.
Getting back to the ZAR, we eventually ended the SA close at R14.67...
...it had been quite a week!
With our Wednesday forecast being validated perfectly, it was another amazing call from our trusty system.
And that was the wrap!
The Week Ahead (9-13 August 2021)
As we look to the week ahead, we have very limited events in terms of economics, but expect plenty of lockdown news - and to see the long term effects of the Cabinet Reshuffle events.
Here is what little we are watching next week:
- US - Jobless Claims
- EU & UK - GDP, Unemployment Rate
Bottomline for the Rand: Do not expect any less volatility in the week ahead.
We have some levels we are watching to confirm our preferred counts and will be continuing to filter out the noise and simply follow the what the charts themselves are telling us as to how far, based on our Elliott Wave based forecasting system.
We suggest you do the same!
Please take our Rand forecasting service for a test-drive!
This will give you access to the same charts we are to give us and our clients the likely direction of the Rand - ahead of time, enabling you to make educated and informed decision.
Simply use the link below to get access now. No charge. No card. All yours to trial for 14 days.
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To your success~