A tough week for the Rand - the noise is ever increasing around the local market, and it is struggling to keep above it all. Following one of the best weeks of the year, this last one was a little tougher going for the Rand.
While we are in December, there is a lot still to come in this year.
The 'Ramaphosa Effect' is being talked up majorly, with many saying his victory in the ANC Conference could be crucial. All eyes are clearly on that event - it is going to be a 'biggie'.
With just a few days away from the event, let's see how the past week fared...
How It Happened (4-8 Dec 2017) |
Friday's prediction showed the expected trend to touch into the R13.78 and above area, before we would then see it falling lower to test the R13.50-13.40 sort of levels.
Click to enlargeAnd the first half of the week followed very closely on our expectations, as the Rand strengthened handsomely - put down largely by economists to the "Ramaphosa effect" (we don't know what caused it - all we know is that sentiment was going to drive it there irrespective).
Some key events in the week:
- Ramaphosa wins 'Round 1'- while this is a small victoryand a positive for the week, it still does not mean too much in the big picture.
- Steinhoff CEO resigns - if anyone wants to know how to crash their shares in a few hours, take a look at what transpired this week, as Steinhoff shares dropped 62% in value, after their CEO resigned.
- Trump's controversial decision - the US President chose to make Jerusalem the capital - a controversial decision, but clearly the right one.
- Jacques Pauw controversy - the developing saga from his explosive book is far from over just yet...
When Monday arrived, it was clear this week was going to test the Rand's resilience post S&P's #JunkStatus downgrade.
It had been a remarkable few days already, and Monday opened with the Rand at 13.70/$ amidst local news that Ramaphosa had gained a good lead building up to the elective conference, as he held a 62% to 38% advantage over Dlamini-Zuma.
What this means toward the real event, remains to be seen, as it is said that there was some 'under the table' business going on in some of the voting. To make matters worse, the elective conference is VERY confusing - watch this video by News24 explaining it
But now, it was a new week.
And with some key events (SA Q3 GDP, some Brexit talks and then the big one - US Non-Farm Payrolls on Friday), the chances of some head winds were certainly present.
Initially, it looked like the Rand was headed higher as it started the morning by moving up to touch above R13.80/$ - this was right in our target area, and if our analysis was right, we were primed for some major Rand strength.
And boy, did we get it!
The market tumbled, spiraling from that 13.80 mark, to touch as low as R13.48 to the greenback, before the end of the day. Surprising stuff, yet exactly as our forecast had anticipated.
Of course, economists were looking for reasons - and touting the "Ramaphosa effect" (What would you prefer: reasons to justify the Rand's move when it is had already happened - or a forecast giving you a heads up beforehand?)
Although it seems unbelievable, foreigners are piling into South Africa’s bond market. Foreigners currently hold 41.7% of local government debt, the highest it has ever been, helping to drive the Rand stronger...this amidst the bad news that the petrol price was headed north a full 73c...ouch!
Overseas, the pound had slipped a little after EU commission president and British Prime minister Theresa May failed to agree on the Brexit divorce.
On Tuesday, the market was choppy, but remained stable, ending up touching as low as R13.41/$, achieving our expected target level from last Friday.
GDP figures revealed the economy grew more than expect in the 3rd quarter with GDP figures released at 2% quarter on quarter. The agricultural sector was the main driver as it continues to recover with 44.2% growth in the quarter while mining and manufacturing also improved. This combined with foreigners laying into local bonds, created a much-needed touch of optimism.
As Wednesday rolled around, there were concerns for what Thursday would bring. President Jacob Zuma is scheduled to deliver an hour-long address at a controversial two-day energy indaba on Thursday - nuclear, anyone?
And then the big news for Wednesday was Steinhoff - as CEO Markus Jooste quit over accounting failures, sending their shares tumbling over 62%...
So far, nothing is clear, and speculation is everywhere, but Jooste's action shows that there is a lot more that is still going to come out from this - the full story is here for everyone to get up to speed
But back to the Rand (with so much other noise going on, it is easy to get distracted...)
Some ground was lost on Wednesday, after touching a low of R13.41/$, and by the time Thursday got underway, the market sat at R13.53.
Thursday was a rocky day for the Rand - after opening at R13.53, the market weakened to move well over R13.70/$.
And meanwhile, in case you missed it, Dynamic Outcomes had their article featured on Fin24.com for the first time
Wednesday was full of news, with Steinhoff debacle unfolding, Trump's decision on Wednesday to declare Jerusalem the capital instead of Tel-Aviv, and the ANC conference jostling all combining together. Alongside that, there was positive news coming from US Lawmakers regarding the tax overhaul, that progress was being made - what this meant for SA was unclear.
By Thursday, Steinhoff's share price lost all of 80%, and the Rand touched a high of R13.7582 early on Friday.
SA Business Confidence Index was down to 31% from 35% in October, which some said added to Rand weakness.
Despite low business confidence, Ramaphosa was positive, saying if SA makes the right moves, the economy could grow at 4% (we will shortly see what moves SA makes, when the conference rolls around...)
US Jobs data was due on Friday, with an expected 200000+ jobs having been added, to keep unemployment at its 17 year low of 4.1%...these numbers just seem ridiculous in comparison to South Africa!
Tha Rand gained well during the day ahead of the Non-Farm Payroll, moving to touch R13.54 before losing half its gains of the day once the news hit, with actual jobs created being 8000 more than expected.
And with that, the week closed out at around R13.65/$...all in all, not a bad week considering the volatile climate.
The Week Ahead (11-15 Dec 2017) |
This week opens with all eyes on the ANC Conference.
As we have seen from predictions prior to elections, they are seldom accurate. The Democrats made that mistake in 2016, in the USA, as all predictions said a Trump victory was impossible. It happened. So, I would not be pinning my hopes on a Ramaphosa victory, just yet (especially with news of buying votes doing the rounds...)
Many are asking what the effect will be on the Rand if Ramaphosa wins, and what will happen to the local currency if he doesn't?
As always in these situations, it is impossible to tell market direction from events - the market will move where sentiment takes it, and the only dependable way to get some direction is to look at what the sentiment patterns are telling us themselves....
...we will leave the economists to hatch up some backward-looking reasons for the moves once they have happened.
So...do you want to cut through all the noise and hype and get a dependable weather forecast for the Rand for the next few days, weeks and months ahead?
Simply hit the link below - and get on the inside track now....
Look forward to helping succeed~
Kind regards,
James Paynter
