Rand keeps holding strong in 2018

Well, firstly - welcome to 2018 and our first Rand Review of the year - and trust you had a great break and have fully recharged!

The new year has well and truly set in, and that means the Rand Reviews are back, as we take a look at the last few days movements, and then a little on where we see things going.

The Rand has been on the front foot the whole way through December, and made some fantastic gains - including touching 12.23 this week - its best level since July 2015...

...who would have thought so just 2 months back when we were at mid 14's (except those fortunate enough to be in our inside circle)?

And while a little choppy, the Rand managed to hold its position through the new year too, staying in a range of R12.54-12.23...which is not bad going!

However...

January has now begun in earnest, so we can expect there to be more happening after the quiet holiday season.

The #CR17 effect which many claim is driving the markets is expected to wear off - or perhaps has already...

So where to from here?

Let's start with a review of how we fared this last week...

Our first forecast for the year of 2018 was issued on Friday, giving us the updated look for the week ahead - while not many were going to be trading on this week, it was important to get an early forecast out.

While many thought the Rand's run was done, our forecast said that it was not...not just yet, anyway!

Click to enlarge

Key events for the week followed - namely political ones:

• Zuma announces 'state capture' commission - contrary to expectation, the President announced a commission was going to be appointed...
• Ramaphosa continues to push land expropriation - further comments on this subject have continued to flow, as it is clearly high on his priority list.
• ANC Meeting - despite a Zuma ouster expected, he managed to survive his first NEC meeting without any discussion on his future...
• Finance Minister Gigaba prepares for Feb Budget - the countdown has begun...will this year be any different to his mid-term attempt?

Monday began, and for most, with it the December-January break ended, very abruptly.

The market was choppy to start, and why wouldn't it be after ANC President Ramaphosa made more outlandish comments over the weekend regarding land expropriation without compensation...

The dangers of what Ramaphosa is trying to do was laid out very well by BizNews in an article describing the chilling history around such blatant Communist actions...

In the first half of the day, the Rand weakened nearly 20c...not a great start to the new year. However, it did stabilize in the latter half, to end around R12.38/$ in the evening.

Major upcoming events in the near future were:

• ANC Meeting on Wednesday
• SA 2018/19 budget on 21 February
• Credit Rating decision sometime in the 1st Quarter
• Possible US Fed Interest Rate increases...
• ...a hopeful economy waiting for Ramaphosa to rejig it

But for now, we were on to Tuesday...

Many persons said that it was the Rand crashing back to reality after the holiday period on Monday, as business as usual resumed...

...and with Wednesday being the much anticipated NEC meeting, was Zuma to be ousted...?

Many were hopeful, saying he was to face an ouster bid, while others were saying maybe not just yet...

Despite all the hopes of a change of leadership, the fundamentals would take some fixing - such as the GDP growth for SA being predicted at just 1.1% in the whole of 2018.

On Tuesday, the market was jumpy once again, moving between 12.46-12.27 in a very short space of time.

Eventually it balanced out again to end the day around mid R12.30s, with the zigzagging prompting all sorts of reasons for the sudden moves, the best coming from tongue-in cheek Currencies Direct: "Reports of ‘Zuma’s downfall’ caused the rand to spike nearly 1% stronger yesterday; you may be disappointed to learn it was not the President, rather a US Government spy satellite that had gone astray (codenamed ‘ZUMA’). High frequency algorithms picked up and reacted to the news, which of course was not referencing our dear President. The excitement lasted a matter of minutes, with markets correcting shortly after."

But Zuma was clearly wanting to keep himself firmly in the news, as he made an unexpected announcement that he would be appointing a State Capture commission...

...is it a case of a shift of power, or has he something up his sleeve in this one too?

Onwards Wednesday, the day of the ANC meeting.

With high expectation, the market was poised to react to a Zuma oust...or just hold tight if nothing happened.

However, in anticipation of the meeting already, the Rand jumped over 20c - it ended up touching R12.54...

This break to 12.54 meant that our delay level had been hit, and we were not immediately going to be targeting the expected area just above 12 as soon as we had expected. However, the count is not yet invalidated...

The news came in the late afternoon that the ANC meeting had gone off smoothly, but with no mention of Zuma's future at all...the market duly reversed, and despite being a touch unsettled, it ended the day around R12.45/$.

And the markets remained rather quiet on Thursday, leading into the final day of the week. Despite the hopeful attitude many had for the ANC NEC meeting, it did not seem to have hurt the ZAR too much that he was not ousted.

Many believe the markets will likely remain sensitive to any news surrounding the Presidency, with Ramaphosa's ANC’s birthday speech at the end expected to give insight into his thinking and plans ahead.

Overall, the Rand hobbled through the day, despite Finance Minister Gigaba's heads up to "expect a drastic decision in budget speech on free education" and even managed to a late evening push, strengthening to R12.38/$ as it headed into Friday.

The last day of the week was also not much to write home about, as the market continued to hold steady, with positivity still high that Zuma's time was running out,...
...and with that the week closed off - an overall successful one, although rather slow moving!

Monday starts with weekend news of EFF thugs trashing H&M stores in a race-based display of pure anarchy...

....who knows, perhaps they were trying their best to justify Trump's alleged "shithole countries" comments (quite honestly, where else would you see this kind of 'jungle' justice)?

We have an interest rate decision this week, and of course, we still have the budget and credit rating decisions hanging over our heads in the next few weeks.

All eyes will be on how the political situation unfolds - is there any chance SA will escape the guillotine this time round? What will be the effect on the Rand?

For many, the future is full of uncertainty.

For us, us though, we will simply be keeping an eye on the patterns of sentiment as they unfold - giving us a much clearer picture than trying to decipher the news....

Why not join us on the inside track - and get an unbiased, objective view of where the market is likely to head the next few days, weeks, months and years.

Look forward to helping succeed~

Kind regards,

James Paynter