ZAR Forex Report

As can be expected from a South African player, the Rand handed off a massive JSE capital inflow glitch and remained within range at the start of the week.

CPI inflation data for June was released last week Wednesday and came out as expected at 6.3% – slightly higher than the 6.1% for May and still outside the SA Reserve Bank’s target of 3 – 6%. While a slowing economy and the worst drought in over a century certainly is taking its toll, a stronger Rand helped keep the figure relatively low.

The ZAR gained slightly following the data release, up 0.3% to 14.29 against the USD and remained range bound against GBP at 18.93 and EUR at 15.79.

At a press conference after Theresa May’s meeting with German Chancellor Angela Merkel, the new PM announced that she will not invoke Article 50 this year, giving the markets some short term relief.

Following the inflation figures, more data from SARB was released on Thursday – this time interest rates. The central bank left interest rates unchanged at 7% – in line with expectations.

“We have passed the button on inflation” said Governor Kganyago, which indicates an end to the raising cycle as the Bank cut SA’s growth expectations to zero – down from 0.6%.

The ZAR appreciated by almost 1% to 14.21 v the USD, taking its gain for the year to 8.7 percent.
Incidentally, the ECB also kept Euro interest rates unchanged on the same day.

The ZAR has been trading and is expected to remain range bound this week; it has been trading between 14.20 and 14.40 against the USD for some time. It took a massive inflows / outflows error by the JSE’s “computers” completely in its stride and didn’t react as many thought it would. Perhaps the news was already known to insiders?

The JSE incorrectly reported that there were R98.10bn in net purchases – the record foreign inflows – when there were actually net sales (outflows) totalling R36.35bln over this period, a massive R134bn difference. Ouch.

At the time of writing, the ZAR still remains within range as it looks north to the US rate announcement tomorrow, Wednesday. While no change is expected, the markets will look at clues for a possible September hike. Other news to look out for includes SA PPI and trade balance reports as well as US consumer confidence and Euro inflation.

Have a great week.

ZAR FOREX RATES

USDZAR = 14.3748
GBPZAR = 18.8819
EURZAR = 15.8366
AUDZAR = 10.8264
NZDZAR = 10.1761
CADZAR = 10.8848
CHFZAR = 14.6153

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