Another interesting week in the markets as the Dollar continued to lose ground against the Rand...
...as did the Euro and Pound, as Brexit tensions reached an all time high.
It was almost as if the news from the US side of the pond was taken more positively by the Rand than the Dollar... US-China trade talks resumed, and the implementation of extra tariffs has been put on hold until some kind of agreement has been reached. Not only this, but reports have it that expectations were for a "monumental" agreement to be reached in the next few weeks, as per Donald Trump.
And yet, it was the Dollar on the backfoot.
(Proving once again that news does not ever give us a picture of where the markets are heading).
And so, let's get into the review, and show you how you could have foreseen this move stronger from the ZAR...
Our week began with the forecast on Friday the 29th, giving us the outlook for the next few days.
With the Rand having already come off the high of R14.75, the bias was for further Rand strength, with a move down towards R14.00 (with a small chance of a last thrust higher).
This was still before any news of Moody's decision on the credit ratings...a brave call, but that is what the wave count was showing us.
And as it played out, we had another interesting week, with some noteworthy headlines:
- Moody's gives a lifeline - the biggest rating agency had mercy, and held off one more time on downgrading SA to the feared #JunkStatus
- Brexit - it is near impossible to keep up with the slew of news on the shambles in the UK parliament, between the delays, cross-party talks, compromises, multiple votes with no real meaning and more!
- Petrol price hike - an enormous burden on motorists with a more than 100c increase, thanks to the Oil price flirting with $70 to the barrel.
- Trade talks - reports have it that some progress has been made between the US and China, as emerging markets watched in anticipation.
- US Non-farm Payrolls - the US market continues to generate jobs and beat expectations.
The week began well with Moody's not coming down with the hammer of judgement for SA, and rather choosing to say nothing. The markets took no news as good news, and opened nearly 15c stronger as Asian and Australasian markets began trade early Monday.
It was not until later in the week that Moody's released a statement - and a pleasantly surprising one at that.
The credit opinion on SA highlighted the challenges facing the economy, but overall was surprisingly positive. The agency acknowledged that it is going to take time for SA to fix major issues, but it appears that they are going to wait before making any decision on a downgrade. For now, SA remains on a stable outlook, above #JunkStatus...
...this is very gracious of them, particularly considering the Eskom situation!
But the warning from business leaders was "don't relax yet" - this was a lifeline handed to President Ramaphosa...
...not a clean bill of health.
However, with that news, the Rand was on the front foot, and had moved stronger... exactly as per our forecast:
In other news, Brexit continued to unfold after the 8 rejected proposals of the previous week. The extension had already been put in place to 12 April, but that was really not enough time to fix the glaring issues of previous deals.
Parliament had rejected so many deals, it seemed difficult to believe any one would ever pass in such a short space of time...
...and one feels this lead to the vote to force Theresa May to ask the EU or an extension beyond 12 April.
She was getting forced into a corner now, even holding cross party talks with sworn enemy Jeremy Corbyn of the opposition Labor party, just to try and get some compromise which both parties can sort of agree on...!
All the while, the Rand made slow but steady progress, closing on Thursday around R14.11/$ - right in our target area from Friday's forecast.
There were some other key issues and headlines which dominated the week:
- Eskom's situation was made a little clearer, as Pravin Gordhan released information on how they are planning to get through winter with electricity supplies already being so thin. Eskom has developed a winter plan, and while load shedding is not off the table, it seems to be more under control - with a chance of only Stage 1 Load Shedding through to the end of August. However, the drastic situation has resulted in an enormous usage of diesel to try and cover for failing power plants - and therefore an enormous amount of cash being burnt up in the process...
- ...and on that note, the Eskom secured a R2.5bn loan from the National Development Bank (the BRICS Bank) to boost renewable energy projects. SA, and in particular Eskom's dependency on BRICS appears to be increasing by the day...and one wonders what the long term effects this is going to bring with these bailouts (China and Russia don't lend money just to help others). The NDB intends to issue Rand bonds, and list a Rand bond on the JSE later this year.
- SARS, under the new head of Kieswetter, has had a tough start already, as they announced a budget miss of around 14.6 billion. This is put down to higher refunds this last year, resulting in a 1.1% shortfall compared to the target figure.
- Petrol prices brought a major shock to motorists, as a fat R1.34 increase in prices sent everyone in a frenzy to the pumps. With the Oil price hovering around $70, this increase was always coming, as prices worldwide skyrocketed. One would hope that fall-off in oil price + the stronger Rand will help out next month.
- And then it was Friday, with US Non-Farm Payrolls coming in much better than expected, marking the longest streak of consecutive jobs growth on record, with unemployment still down at a negligible 3.8%.
And even this the Rand took in its stride, touching R14.00 before closing out a shade under R14.10 to the Dollar - a solid performance for the Rand!
The Week Ahead (8-12 Apr 2019)
So what does the second week of March hold in store?
In terms of potential Rand triggers, we have amongst others:
- Brexit D-Day scheduled for Tuesday, but could be delayed.
- EU Council on Brexit
- ECB Interest Rates decision
As far as the Rand is concerned, last week has shown how quickly the market can turn (we saw a 50c move Friday to Friday)...
...and how imperative it is to have an objective view which anticipated this move, allowing you to take action - in time, with less time, stress and effort.
This week will be no different with some significant whipsaw action expected...
So, my question :-
Have you been caught by unexpected moves, leaving you feeling frustrated, angry and overwhelmed?
Well, I know the feeling...I have been there many times in the past.
And that's why I am here to help make your forex experience decision-making more profitable - with less stress, time and effort.
The best I can do for you is share our roadmap for where the market is expected to head the next few days weeks and months ahead - for free.
Appreciate your feedback and thoughts.
To your success~