Volatile climate has little effect on the stronger Rand...

All too quickly, this year is already three quarters over!

And, as the last quarter kicks in, the Rand has certainly got some spring back into its step after spending some weeks in the winter doldrums.

This week was another for seeing Rand on top, fighting hard against the strong Dollar.

It was also a week of big news, with UN talks and more on the go.

So...

...let's take a look at how it all happened

Here were some of the bigger headlines from the week:

  • UN talks - these always seem to end up in some or other kind of controversy, as the lack of control and power in the organization leaves it virtually worthless. This time around was nothing different.
  • US Interest Rates - the only economic event bigger than Non-Farm Payrolls as a trigger. This week, it was time for the Fed to make the call again...
  • China and the US - the war continues, and this time going to a whole new level as Trump brought forward accusations that China was meddling in the US elections...not what the Trade War needs right now!
  • Ramaphosa view on the Rand - he announced that he believes that the ZAR is undervalued, and that it needs to get back to a more even level to allow for good trade. A brave call from him...
  • SA & US Economic figures - everything that came out seemed to be anti-Rand, and yet somehow, the local currency kept up its strong trend!

The ZAR has managed to keep a solid period together for the most part of September, since its high on the 5th:



The Dollar Index (DXY) has also largely been on a downtrend since mid-August, apart from strong retracement this Friday, which has also contributed to this turnaround for the Rand - some much needed relief for sure.

This week was no different, as the market continued its downward trend...

...however, not as strongly as the previous few weeks - signs of the market running out of steam?

Despite it being a public holiday in SA with Braai Day being enjoyed, it was one of the more volatile days in the whole week. We opened around R14.35, broke lower to R14.20, and then ended the day back over R14.35 again!

It had been a hectic few days leading in to the weekend, with Ramaphosa's stimulus package, Brexit talks and US-China trade tariffs...

...anyway, very choppy trade took us into Tuesday, where everyone got back to work and the Rand continued its choppy trade.

All eyes however, were on Wednesday. The US Fed was due to make their decision on the Interest Rates.

Emerging-market currencies were on the edge as US policy-makers widely anticipated to raise interest rates by 25 basis points - and that was exactly what they got. However, the reaction from the Rand was not one that economists would have expected...

...let alone that the US economy grew by 4.2%

...and SA's producer price inflation swelled to 6.35%

Yet, this was how the chart looked as we neared the close of the week:



There was more to the week however, than just those few events:

  • Ramaphosa went to the UN this week, and tried to reassure that global (and local) communities that “There's no land grab in South Africa.” This statement is tough to justify, when there is already one land grab in process, which Afriforum is assisting the farm owner with defending. Along with that, Ramphosa said that "There are no killings of farmers...or white farmers in South Africa" - which is also impossible to back up with facts! The international community is watching...

  • Trump succeeded in rocking the global boat once again, as he brought forward allegations against China at the UN conference this week. He spoke strongly against China, saying: “Regrettably we found that China has been attempting to interfere in our upcoming 2018 election coming up in November against my administration,”.

  • This is not the first jab that the President of the US has taken at China, and it certainly is beginning to get to the Chinese, as they are battling against his Trade decisions already.There are warnings that the Chinese Yuan could still have some room to fall, with a further 10% loss of value possible (but that is economists talk - we have not done an analysis ourselves...)

  • Brent Crude oil prices have just continued to soar, as the price per barrel has now climbed to more than $80, the highest level we have seen in years. This is not good news for motorists once again, and there are warnings of it heading over USD 100 to the barrel, if the US were to impose oil sanctions on Iran...

  • One of the other things which Ramaphosa spoke on in his talks at the UN General Assembly was the value of the Rand. He believes that the Rand is "undervalued", a view which was echoed by Goldman's Coleman.

  • As the dust settled this week after Ramaphosa's announcement on the Stimulus Plan, Fitch Ratings view on Stimulus Plan was announced - and suggested this would deliver a "significant boost" to the economy. We will have to see how this plays out...
To end the week off, the Rand closed at R14.15 or so, on the back of some good news from SA's Trade Balance that they were back from a deficit to a surplus...

It has been a rocky ride for the Trade Balance, but hopefully it will be more consistent going forward...

And then that was that for the week...with the Rand managing to end the week around 14.13 - a pretty plucky effort!

The Week Ahead (1-5 October 2018)

The Rand has strung together 3 weeks of solid performances, but can it hold onto these hard-fought gains?

This week sees some high impact fundamental events, which could provide plenty of volatility - apart from all the political turmoil that is happening locally and abroad.

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.

We are expecting the Rand to lose a bit of ground won, but it will certainly not be one-way traffic.

To look at where we see the market heading the next few days and weeks ahead - and what key levels we are looking at to confirm our wave count, simply join us for the next 14 days for free.

Just use the button below - and I'll see you on the inside!

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To your success,
James

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