ZAR Forex Report: Expecting volatility
Given the weakness, the Rand was an underperformer at the start of the week
A favourable global risk environment and USD weakness saw the Rand burst through key levels over the past week.
USDZAR opened last Wednesday at 13.10 and appreciated to a low of 12.79 last week and even stronger this week.
The Rand, as expected, reversed the politically linked gains of the previous week as it became clear there would be no immediate change in SA’s political landscape.
Given the weakness, the Rand was an underperformer at the start of the week.
The ZAR was spared further losses, along with other emerging market currencies due to sharp USD losses – EURUSD traded above 1.1250.
Fitch and S&P kept SA’s ratings unchanged last week.
Reduced global risk saw the Rand strengthen at the start of this week as the Rand opened the week at 12.85 against the USD after Friday’s weak US non-farm payrolls pushed the USD down.
We are expecting the ZAR to remain range bound until Thursday when 3 major events are likely to cause nervousness and in turn, volatility. We have the UK election where the Tories seem to have lost some of the massive gains which they have had over the Labour Party.
Then, ex FBI Director James Comey is set to testify in the Senate which, in theory could bring down team Trump. Lastly, we have the ECB meeting.
Today, SA’s GDP figures for Q1 of 2017 were released – gross domestic product contracted 0.7%, indicating that we are officially in a recession as it follows the previous decline of 0.3%.
Given the current political and economic climate, the investors and the World Bank believe growth will remain low for the following two years.
Other events to look out for is the Moody’s rating review of SA on Friday.
ZAR FOREX RATE
USDZAR = 12.8429
GBPZAR = 16.5865
EURZAR = 14.4475
AUDZAR = 9.61209
NZDZAR = 9.21180
CADZAR = 9.54632
CHFZAR = 13.3229
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