ZAR Forex Report

On Friday evening S&P will deliver its review on SA’s credit rating and whether we get downgraded to junk status.

Best you get the champagne ready, for as Napoleon said “In victory one deserves it, in defeat one needs it.”
At this stage a downgrade in June still seems 50/50; Standard and Poor has been pretty non-committal in their comments thus far, giving fairly standard warnings over weak GDP, state finances and quick fixes.

A surprise jump in new US home sales to an eight year high, Brexit seeming less of a possibility and a better Greek situation all increased investors’ appetite for risk last week and helped emerging currencies and the ZAR make some gains. On Wednesday the ZAR opened @ 15.61 against the USD, moving to as “low” as 15.50.

While higher oil prices are not a positive for the Rand and our economy in general (considering we are net importers), in the short term it does inject confidence into the global economy.

Oil is again trading above $50 per barrel, meaning local fuel hikes (make sure you fill up), but also a more stable global economy and an increase in risk appetite. In saying all of this, investors and traders still remain cautious – this is evident in volumes last week as it was the quietest in the currency markets since January.

With Monday a bank holiday in the US and UK, trading and movement has been quiet.

We expect the Rand to remain range bound throughout the week with no massive movement or events as it keeps its eye on the horizon.

On Friday we expect big swings and volatility as S&P will release their SA credit ratings and the US non-farm payroll data will provide direction for the US Fed meeting and whether Chair Jennet Yellen will increase US interest rates.

At the time of writing, the ZAR was trading slightly weaker than Monday at 15.84, after opening at 15.79 against the USD.

The risk of a downgrade is evident in the bond market as SA companies are not prepared to put their chips on the table, given the poor odds.

Corporate bond sales in the second quarter have slumped 15 percent from a year earlier.

And finally, Nelson Mandela’s will has been finally been read and it seems the great man continued his good work right to the end; all employees, including cleaners and cooks, were handed cheques of R50,000 apiece. Top bloke!

While Friday’s S&P and non-farm payroll data steals the attention, keep an eye out for SA money supply and private sector credit on Tuesday and SA electricity consumption on Thursday.

Have a great week; let’s make it rain.

ZAR FOREX RATES
USDZAR = 15.8530
GBPZAR = 23.1196
EURZAR = 17.6418
AUDZAR = 11.4610
NZDZAR = 10.6426
CADZAR =12.1324
CHFZAR = 15.9874

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