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It appears that volatility has made way for early gains in the local currency as positive market sentiment returns.
The Rand started the week on a volatile note. On Monday it traded between R18,28 and R18,41 to the Pound. This was mainly a continuation of the previous week’s trend and the associated risk aversion dynamics. This changed on Tuesday, when the UK proposed the Benn Bill, a new law that will block a no-deal Brexit and prevent the UK from crashing out of the EU without a deal. This positive outlook was bolstered by the dropping of the extradition bill in Hong Kong which saw the Rand, along with other emerging market currencies, end the day in positive territory.
On Thursday, South Africa recorded a worse-than-expected current account deficit. The Rand then reversed much of the previous day’s gains. However, sentiment remained positive as certainty regarding the US-China trade war was gained from their proposed talks. By Friday much of Thursday’s losses had been regained. This trend extended into Monday (yesterday).
Traders and investors will continue to keep an eye on the Brexit extension bill and the US-China trade talks. These two issues will continue to dominate risk sentiment and will have a huge influence on the strength of emerging market currencies, especially the ZAR.
Market Event Calendar
Tuesday 10 September
- UK Employment Change Data
- SA Manufacturing Production
Thursday 12 September
- SA Business Confidence
- US Inflation Data
Friday 13 September
- Retail Sales and Import/Export Data