Sun. Oct 20th, 2019

South African Rand: Choppy moves continue

The week began with the Rand trading in a tight range as the currency markets seem less than enthused by last week’s State of the Nation Address.

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This Rand report is brought to you by Sable International

The GBP/ZAR is currently trading at R18.32 to the Pound after testing down R18.27 last night. 

Looking ahead to a very quiet week on the data front, it’s difficult to find a coherent argument for why the Rand should not recover further other than idiosyncratic domestic factors that might be revealed in parliament. The only significant domestic data release of note for the Rand is the publication of the South African Reserve Bank’s (SARB) leading indicator for April, which is expected to have ticked up to 104.9 pts from 104.5 pts in March.

The indicator has not given positive
leading signals for the country’s economy for half a year now, and the negative
trend is expected to continue in April.

The other main driver of the Rand is likely to be geopolitical or macroeconomic in origin. The G20 summit, which starts on 28 June, is one event which is likely to have global repercussions and could move the Rand. All eyes will be on the scheduled negotiation meeting between President Donald Trump and Xi Jinping.

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Given the wide divergence in negotiating positions and the complexities of the issues, which encompass national security as well as trade, it now seems unlikely a solid trade deal will be agreed upon any time soon between the US and China.

Market event calendar

27 June

  • Producer Price Index: Changes
    in the PPI are widely followed as an indicator of commodity inflation.
    Generally speaking, a high reading is seen as positive (or bullish) for the
    Rand, whereas a low reading is seen as negative (or bearish).

28 June

  • M3 Money Supply: Considered an important indicator of inflation, as monetary expansion adds pressure to the exchange rate.
  • Trade Balance: A steady demand in exchange for South African exports would turn into a positive growth in the trade balance, and that should be positive (or bullish) for the Rand.

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