Rand makes a swift recovery from Zuma-flu!

Well, well, well...who would have thought?

After a catastrophic previous week with Zuma surviving the #NoConfidence vote, all eyes were on the Rand to see the longer term effect.

And how often has it happened, that the Rand delivers exactly the opposite to what the general public expects?

Contrary to the public's feeling surrounding the vote, North Korean threats, Barcelona terror, the Moody's negative announcement, the Rand was sturdy as anything!

It was choppy, it was tough going, but the Rand battled on...

...and ended up really getting some gains from doing so.

Lets go through how it all happened...

On Friday, the focus was all on the USA side of the pond...

Trump, Kim Jong Un and nuclear weapons make quite a combination, and it was all over the headlines.

This is the question facing markets, and one that will no doubt send investors scurrying for safe haven assets. That means rand weakness, and explains why the rand opened at 13.45/$ this morning.

So with this, and an expected decision of Moody’s rating later in the day, we got to work on our forecast.

The expected outlook (see below - click to enlarge) showed us to be expecting to head down below R13.42 before bottoming out and heading upward to toward the target area of 13.68-13.78.

Click to enlarge

When Monday dawned, the storm over North Korea seemed to have blown over to a certain extent (perhaps with Kim realizing that his pop-guns are not quite as powerful as he thought when the US flexes its muscles...)

Moody's was yet to make an official statement on SA's rating, and the Rand had pulled back a bit after poor US inflation figures on Friday.

Onwards into the week we headed...

And the ZAR got off to a good start - Monday provided a stable day in which the Rand made some real progress, where it eventually ended the day in the low R13.30s.

A more than 15c gain and some stability was just what persons were looking for, and this creating some calm...

Tuesday beckoned with the North Gauteng High Court to give its ruling on the Public Protector's recommendation to change the SARB mandate...

...also expected was a belated economic growth forecast for SA from Moody's.
The Rand's good Monday was put down to this by TreasuryOne in a note to clients:

"Last week's geopolitically-driven 'risk-off' move in markets showed some signs of stabilising on Friday, perhaps helped by US CPI that came out worse that expected. This supports the market's view of a 'lower-for-longer' Fed on interest rates".

Whatever it really was, it gave the Rand the boost it needed.

As for Tuesday, things were pretty choppy...

And this was despite the SARB winning its application to have the Public Protectors recommendation set aside.

However, Moody's put out SA's Economic Growth Forecast...it didn't look good.
It was adjusted downards to 0.5% in 2017 and 1.2% in 2018 - low economic growth and higher unemployment rate once again the issue...

...and the Rand struggled to settle, with jerky movements marking the whole day - it even pushed as high as R13.41 before dropping back under R13.30 to end the day.

Onwards to Wednesday...

...and the Rand had other plans this time round.

It was out the blocks from the word go, and just kept going!

By mid afternoon, we were closing in on R13.20.

By the time the day came to a close, we had broken as low as R13.16!

So with the Rand at its strongest level for the week so far, our forecast for the coming days was due...

...and due to the Rand breaking that R13.3094 level and the accompanying wave structure requiring a change in preferred wave count, the forecast for the coming days was an interesting one...

On Thursday, the Rand's opening level was one of the best we had seen all month - R13.17/$.

But it seemed that Thursday was going to be another one of these days which are just filled with more classic Rand volatility.

The biggest news from Thursday was that US Fed meeting minutes revealed Fed officials believe another interest rate hike is necessary in 2017, but the hike is more likely in December (rather than September as previously predicted).

Also, a year ago, South Africa’s biggest gold producer was churning cash, sizing up acquisitions and plotting expansion projects. Today, Sibanye Gold, is making losses and shutting mines.

Tough times...

As for the market movement, the Rand wobbled its way backward and forward, eventually limping its way to a close over R13.25/$.

And finally, there was Friday...

The Rand was on a positive note, and it seemed nothing was going to stop it.

And even after another horrific terror attack in Barcelona on Thursday evening which left 14 dead (with the number possibly to rise), and over a 100 injured, the Rand was not deterred.

Even though the Rand weakened to over R13.30 on Friday morning, it took back its losses to come back under R13.20 in the late afternoon!

This on the back of Trump's business style 'hire and fire' style of presidency, as Steve Bannon was the next one in for the chop as he was fired on Friday evening SAST!

It had been a tough battle for the ZAR the whole week long...

But it had come out tops, ending the week a nearly 30c stronger than where it began...

The week ahead looks fraught with danger, to be honest...

...while we are not saying it is impossible, it is seldom that the Rand manages to string more than 5 days of calm and consistent strength.

In fact, it tends to be that the week following a calm one is even more wild than usual.

And this is not positive news, considering this last week.

With Zuma beginning to discipline his ANC members who voted against him, there is bound to be a bit of a scuffle on that subject, just for a start.

In terms of economic events, things are looking fairly quiet on that front.
As always, the political side can come in to effect when the economic is lacking, to provide a trigger to the sentiment.

Please give us your thoughts and questions in the comments below. We would love to help with your forex situation.

All the best for the week ahead,

James