Rand rallies on Trade War despite Eskom...

A traumatic week is over, with South Africans hoping for a lighter and brighter 5 days ahead...

Eskom dominated the headlines with rolling blackouts as high as Stage 6, wreaking havoc - while parts of Gauteng flooded with unprecedented rainfall...

As for the Rand?

Well, it also got a little flooded, breaking the trend of sideways movement to push over R14.80 again, only to reverse and break sharply lower, with global news taking center stage...!

But that was only a little of the story.

So let's get into the full review...our last for 2019!

It was a week and a half when it came to news! So here are just a few of the biggest healdines:

• Eskom collapse - from nowhere to Stage 6, Eskom brought Saffers countrywide to their knees with surprise loadshedding...
• UK Election - Britain went to the polls to decide who they want to take the country forward - and effectively vote on Brexit or No Brexit...
• Trade War - with time ticking toward the 15 December deadline for more US tariffs, it was a nervous week...and then everything changed
• SA, US & EU Economics - lots of events, stats and decisions to catch up on over the course of the 5 days...

Well, where to start...

First things first - the Rand opened the week around the R14.60 mark, with Eskom having downgraded load shedding over the weekend to Stage 2...

...by 10am, it was Stage 4

...by 6pm, it was Stage 6...!!!

Where had it all gone wrong?

From months ago when officials promised SA would never see above Stage 2 Load Shedding ever again...

...to this week, when all the wheels fell off?

And yet the market remained mostly calm, despite a few little bumps along the way, until midday Tuesday.

And that was when we saw perhaps a belated trigger from the seriousness of the Eskom situation:

And that is without even mentioning half of the news that hit...

The headlines rolled in:

• Stage 6 load shedding a major blow to growth, tax revenue - economists
• Load shedding could slash SA's GDP growth to just 0.3% - Intellidex
• Mines halt operations countrywide as Eskom asks for 20% power savings

And of course, a little local humour despite the harsh reality of the situation... such as " The 'E' in South Africa stands for 'Electricity'! "

Then quickly came the excuses, funding requests and attempts to try and justify what had happened...

It was wet coal. And broken conveyor belts. And unforseen maintenance. And station fires. And finally, Ramaphosa was forced into an early return from Egypt to deal with the situation - and he reported to SA on Thursday that "There has been a measure of sabotage involved in Eskom's load shedding crisis"

The harm to business will only be seen over the longer term as Q4 GDP etc figures come out, but by all reports, the losses are already huge...

Phew, well, that is enough on that front.

Let's take a look at some other major events:

• Over in the UK, all eyes were on the polls on Thursday with the general election (effective Brexit election). The playing field was that if the conservatives and Boris Johnson won, it would hopefully give them the necessary backing to "Get Brexit done" ASAP. If the Conservatives didn't win, then the situation would become a lot more complex with a potentially hung parliament... And so all waited with baited breath for the polls to close at 22:00 Thursday...and they did, with the news of a landslide conservative and Boris Johnson victory! It seems it was "Roll on Brexit" from the UK public...!
• More poor Chinese export data on Monday once again confirmed who was hurting the most from the Trade War - while the US had had record employment figures just a few days before on Friday. There were some tense moments through the week as we rolled toward the 15th of December (the next date for US tariffs to take effect) but it seemed that the US would hold off on these, in view of an agreement being signed. It is still clear that for now, Trump has the 'trump' cards to play, with China surely becoming more desperate as time rolls on...
• Plenty of economic news dominated headlines, as SA Inflation Rate dropped to a 9 year low on Wednesday, at just 3.6% - later in the day the US Fed Interest Rate was left unchanged - and Fed Powell ignored Trump's calls for an economy boost by predicting that rates would remain unchanged in 2020. ECB followed suit on Thursday, also holding rates steady.
• And then for some more Africa news, if you thought South Africa had electricity problems, then take a look at Zimbabwe. In the wake of the Eskom situation, there was no power available to be sent on to Zimbabwe - meaning rolling blackouts of up to 24 hours! This interpreted into simple language: No power, at all, all day. Any economic turnaround in Zimbabwe is just sent into shutdown through events like this. Scary stuff.

And yet, as the week went on, we saw some quite some turnaround from the ZAR - much to the surprise of economists!

After hitting a high of R14.86 on Tuesday at the height of load shedding, many were pleasantly surprised to find the market trading down at R14.50 on Thursday evening!

A drastic turnaround...and just as we were nearing that R15/$ level once again!

What had triggered all this?

One of the most used phrases over the last couple of years: The Trade War

It came out into the open that a Phase 1 deal had been agreed upon...

...and emerging markets loved this news!

Much is still unknown as to the deal - but first indications are of a US-favourable agreement, rather than a capitulation to China's demands as some are trying to make it out to be. China was more desperate for a deal the the United States, and it seems Trump has got some of what he wanted.

The Rand roared to touch as low as R14.37 on Friday...

...and that was the wrap - what a week!

Well, as we look ahead into the shorter week following the SA public holiday on Monday, there are still a number of global events while local news starts to slow down.

Over in the UK we will see Bank of England decide on interest rates, and the UK & US GDP's will come out.

On local shores there is not too much to report, but all eyes will continue to be on the SAA & Eskom situations as to how this plays out...

...and globally will be how Boris Johnson approaches Brexit, with the Pound volatile as ever, following his general election victory.

Then as the finer details of the US-China deal emerge, we will get a clearer picture as to what 2020 holds for us when it comes to global trade...

On the Rand side - the market has traded lower ...

...the break below 14.5133 has been an important one, signalling more near term downside, but it is not expected to be a one-way slide.

To get a look at what we are speaking about, use the link below to get access to our forecasts for the next 14 days.

No card needed. Gratis!

(You don't want to regret not having done so this time next week...)

Look forward to hearing from you.

To your success~

James Paynter