Forex Report – 8 February 2019

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Last night President Cyril Ramaphosa delivered a State of the Nation address that was lightyears away from those of his predecessor. The only problem for the Rand was that at the same time the Dollar found support from international factors and so our SONA address was unable to move us stronger.

These are the mid rates as at 8:10 today:

USD = R13.66

GBP = R17.70

EUR = R15.49

AUD = R9.68

NZD = R9.23

Brent Crude = $61.41 per barrel

 

Market News

  • It has been one way traffic for the Rand this week as we opened on Monday at R13.37 to the Dollar, hovered in the low R13.40’s on Tuesday and then began a steady slide to the current level of R13.66.
  • Ramaphosa delivered his first SONA address last year after being in the job for only a few days (if that) so last night’s address was the first that he could really stamp his mark on, and boy did he do just that. As always there will be political opposition crying foul but three of the main takeaways from his speech include the unbundling of Eskom into three separate entities, the re-establishment of a “Scorpions” like investigative unit within the NPA and the reorganisation of South Africa’s intelligence service. Eskom’s restructure is out of necessity as if it fails then it takes the country down with it while the other two points are aimed at rooting out the corruption and patronage networks that have been engrained in our public and private sectors over the past 9 years. Ramaphosa will come up against stiff opposition on all three items but they signal a change in approach that should be welcomed by investment communities, and support the Rand over time.
  • Ramaphosa also focussed on job creation through stimulating economic growth. Again, this should be Rand positive and the following is an excerpt from MoneyWeb: South African President Cyril Ramaphosa unveiled plans to revive the flagging economy and create jobs, including removing obstacles to investing and doing business, attracting more tourists, and stepping up the fight against graft. “We are undaunted by the considerable difficulties we have yet to overcome,” Ramaphosa said in his annual State-of-the-Nation address in Parliament in Cape Town on Thursday. “Above everything else, we must get our economy working again.”
  • Ramaphosa’s SONA speech will be dissected throughout the day, and predictably labour unions have already said that they will “meet him on the streets” if any changes lead to job losses, but despite all the positives the Rand has remained on the back foot as the Dollar posted gains for the sixth session in a row last night. There were separate events out of Europe and the US which gave the Dollar a boost, and as long as these persist it’s difficult to see the Rand making any meaningful recovery.
  • German industrial production came in weaker then expected yesterday, and this coupled with other poor data sets across the bloc has trimmed forecasts for Eurozone GDP growth, an therefore cooled speculation on the ECB tightening monetary policy later this year. As a result the Euro took another dip yesterday and pulled the Rand down with it.
  • But the main catalyst for our drop came from the US where Donald Trump confirmed that he will not meet President Xi before the March 1 deadline in their trade truce, and the uncertainty around whether tariffs will be escalated on the 2nd of March saw risk assets being sold off while investors flocked to the safe haven Dollar. There is a high level trade delegation in China this weekend so we can only hope for positive headlines next week.
  • No local market data today.
  • Possible USD mid rate trading ranges in the Rand today are R13.50 and R13.80.

 

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