This was one of the more choppy and difficult weeks for importers, exporters and investors alike...
If you are just watching the news and events and trying to make decisions based on this, it not only makes foreign exchange so difficult, but it will (more often than that) end in disaster.
An objective view would have been the only thing that could have saved you - one where you know:
- The trend in various degrees and timeframes
- How far a trend is likely to extend
- When that trend is primed for reversal
- And at what point the expected trend is invalidated
With this objective view, you are able to make informed and rational decisions, instead of emotional and irrational once.
This is what we seek to provide, to help you through the difficult times we are going through (volatile markets, ANC conference upcoming, possibly #JunkStatus and more...)
See below how this week turned out - it was not perfect, but it would have given you a lot more confidence to have our forecasts, rather than just watch the markets jumping about...
How It Happened (6-10 Nov 2017) |
Friday's forecast showed that the trend was still expected to take the Rand higher before it topped out...
Click to enlargeBut for the next couple of days the Rand failed to get in a direction as it zigzagged mostly sideways, despite some newsworthy events ...
Key takeaways:
- Trump Tax Cut Plan - this has been causing SA investors worry as it could cause more interest rate hikes
- US GDP Growth - it is on track to hit 3% for the 3rd successive quarter!
- The President's Keepers - the controversial book from Jacques Pauw launches with a massive amount of backers and public interest...not to mention State Security trying to ban the launch.
- Taxi Strikes - disruption caused as taxi drivers decide to strike in Pretoria
- SARS Tax probe - surprisingly, an investigation into SARS begins as to why so little tax was collected in 2017 has been approved by Jacob Zuma...
Another week began - another week in the R14+/$ areas.
Strong US Data on Friday along with the high possibility of December Fed Rate Hike were said to have caused an overnight weakening of the Rand. Also, there was a large sell-off of emerging market bonds...
On the back of this, the Rand had hit just short of R14.30 before 9am SA time.
US GDP was set to increase by 3% for the 3rd quarter running (yes, that figure is real...)
It was a week of minimal events, so many were unsure of what to expect.
The biggest concern is Trump's tax cut plan, that if passed could have a domino effect leading to rand weakness. In short, if the US cut taxes this could lead to the US Fed increasing interest rates, which would be seen as Rand negative.
As investors leave the Rand, expect interest rates to climb in South Africa, as the Reserve Bank attempts to stem the flow of cash heading out of the country.
With all of this in mind, the market traded sideways, with violent swings in both directions, taking the Rand as low as R14.07, before it pushed up over R14.25 again.
News broke that Finance Minister Gigaba met with World Bank to discuss financing for development of the nuclear power in the country...despite him saying it was off the table at his speech.
So...we will see how that one plays out (fortunately, the World Bank is not filled with Zuma puppets).
On top of that, news on Tuesday announced that SA was to probe SARS for their lack of tax collection in 2017 - approved by Zuma himself...
As the Rand stumbled through to Wednesday, Oil was trading at a 2.5 year high - which only indicates further petrol price increases...
The Rand itself was hovering just a touch over R14.20, but swinging in a range without any real direction.
On Wednesday, the launch of the "The President's Keepers" book by Jacques Paux caused waves of controversy. The expected tell-all book of corruption and trickery which has kept Zuma in office, had attracted letters from State Security to Paux, tell him to cancel the launch (and threats by SARS).
However, it was going ahead regardless, and thousands were purchasing the book, country and worldwide.
Whether it was this, or something else, the Rand took courage late on Wednesday, and accelerated downwards to touch R14.11/$...
With that, it was time for our next forecast...
...while our forecast from Friday had not been validated, it had also not been invalidated. So, we provided an updated look just to keep our clients up to date.
Click to enlargeSome good news for the Rand on Thursday was that the US Tax Proposal was not looking so rosy after all - the first draft was meant to be done today, and there is already talk of a 1 year delay in implementation...
...this is not the type of news President Trump wants.
The ANC supposedly added to rand strength (there’s a first time for everything!) as they announced that their 16–20 December elective conference will go ahead, removing some uncertainty...
YET, despite ALL of this...the Rand went for a loop!
In the late afternoon, it went crashing to over R14.30/$!
So...good Rand news = strong Rand? I think not (try again, economists...)
Once again, this shows clearly that it is impossible to apply common-sense rational thinking to the markets (as economists would love to do) - after all, they are moved by irrational human beings...
Other news floating around was expat tax changes...read here
Friday came with more worries, speculation and political uncertainty.
President Zuma being expected to make an announcement that higher education will now be free - in a country which is already horribly in debt...
Something like this could be really worrying for locals, who are looking for someone to make a positive plan - not continue to sink the country further.
That news coupled together with Deputy President Ramophosa's possible axing means that the Rand was on the ropes - sending the Rand close to our target area against the Dollar.
Another disappointing week drew to a close - leaving many asking the question "what next?"
The Week Ahead (13-17 Nov 2017) |
A fresh week has dawned with the news that Michael Sachs, the long-time budget head has resigned. He was seen as one of the few left who really had a grip on what was happening, and he has finally been steamrolled by Zuma.
Zuma clearly has plans for the remaining days until the ANC conference - and that is a worrying thing.
The markets reaction to this latest news has been awful - the Pound hit 19, the Euro almost hit 17 and the Dollar hit 14.50 - while not crucial technical levels, they had psychological value...
This week is huge, as we have the ratings agencies closing in on the Rand - just a few days remain before the Nov 24th review...
The next week and a half could be crucial before this event - the last the agencies need is encouragement to downgrade SA...
In terms of economic events - we have a few around, however they are offshore so most focus will be on local politics (not the way it should be, but unfortunately is so...)
Time to cut through the noise and focus on what the sentiment patterns are showing us...
Look forward to helping succeed~
Kind regards,
James Paynter
