This last week was nothing short of confusing for most.
After the comeback of the ZAR during the previous week, many had high hopes that this week would have more of the same action.
But certainly was not to be...
...as the Rand held more stable than we have possibly ever seen, the full 5 days.
A total range of around 20c throughout the week must be some kind of record...!
Considering during 2015 & 2016, the Rand moved on average 24.4c per day!
So with not a whole lot to really review, lets get started...
How It Happened (17-21 July 2017) |
The week started on Friday for us, with our forecast for the next few days...and after an explosive previous week, all eyes were on it.
The outlook had the Rand at 13.0209, and with further strength expected in the next few days before the market would then bottom out in the 12.96-12.77...
Click to enlarge...so it looked like, initially at least, the Rand would continue its awesome run.
Friday closed off with the Rand a touch above R13/$, and it was time for the weekend...
Monday morning arose, and all the talk was still around the mining charter being set aside on Friday. Sanity had prevailed for the time being, and that seemed to have given the Rand a boost.
This week’s focus shifts to Thursday’s SARB interest rate decision.
Pressure is building for a rate decrease; however, the general feeling was we would have to wait a little longer for some relief. Brexit talks were also back in action.
Now, when business opened on Monday, the market sat at R13.04.
From here, some downside was to be expected into that target area...
And that was just what we got!
The Rand continued its winning trend by pushing hard the whole day, sending it to a low of R12.89 by the end of the day!
More classic fighting back from the Rand, but we did not expect to see it go a lot lower than this before bottoming out...
It was said the reasoning for this was that the US dollar ended last week on the back foot due to weak US retail sales and inflation data. "This was as well as dovish remarks by Fed chair [Janet] Yellen,” said RMB analyst Isaah Mhlanga in a morning note on Monday.
Onwards to Tuesday, where the Rand seemed to start to hit a mid-week plateau...
On Monday, the US Dollar Index retreated to intra-day lows of $94.476 before recovering slightly to trade at $94.541 when the JSE closed. Alongside that, the Euro against the Dollar reached May's highs from last year, putting more pressure on the greenback.
And it showed, as the Rand held its own the whole day.
Despite some chopiness (which you can always expect), a market range of less than 10c during the course of the day told quite a story...
And onwards to Wednesday we went, with the Rand hovering around the R12.90/$ mark.
In news, South Africa’s consumer price inflation slowed to 5.1% in June, down from 5.4% in May - this is the third decrease in a row now.
With the Rand testing R12.88 to the Dollar very closely, it looked liked it was going to be another very quiet day...
And so it was. Little to report, in fact, bordering on nothing to report at all.
A quiet day pottered along, and before we knew it, it was Thursday, and we were looking at what was going to come of the SARB interest rate decision!
Rand Hits Plateau...
While some were expecting rates to remain on hold at 7%, others said we may see a rate cut.
The SARB was not alone, with the European Central Bank (ECB) also updating us on their monetary policy.
It was expected that a rate cut could see the rand back over 13/USD, however an optimistic SARB and no rate cut may help the rand break 12.88/USD.
At 15:00, SARB made the big call...
It felt as if the whole week had built up to this moment, as everything had been so quiet up until this decision.
And a shocker: the interest rates were decreased!
"The MPC has decided to reduce the repurchase rate by 25 basis points with effect from 21 July 2017, to 6.75% per annum," said SARB Governer. "Four members preferred a reduction, while two members preferred an unchanged stance."
And on this unexpected bit of news, the Rand took a knock.
Losing ground about as swiftly as it has done all week, it moved as high as R13.06 on Thursday evening, before retracing to around R13.03 at the US close for the day.
With just one day left, it had still been a solid week from the ZAR. But one day remained yet, and it can always change in the twinkle of an eye...
And that last day turned out to be a cracker for the Rand!
SARB's decision had made this a happy Friday for all SA’s indebted consumers, after the rate cut was announced. The Governor cited SA’s improved inflation, contrast with a deteriorating growth outlook. The SARB also lowered their forecast for 2017 GDP to 0.5% from 1%.
On the back of this, the market had pushed up to R13.05/$ by the open of business for the day...
...but then, the Rand had some other ideas for the remainder of the day.
From 8am, the course had changed, and the Rand began strengthening!
In double quick time, the market was well below R13/$, and by mid-afternoon it was as far as R12.86!
It had been a fantastic week for the Rand with a range of around 20c during the course of the whole week, and the fact that it made it to close off the week below where it started, was outstanding!
It did retrace during the afternoon, which meant that we made it as far as R12.90 by the close of another week...
It had been smooth sailing...so kudos to the ZAR!
The Week Ahead (24-28 July 2017) |
Such stability being seen during this last week is almost disconcerting.
People were saying "But this is just not normal for the Rand!"
So why did it happen?
It is tough to say when you cannot see the bigger picture. What the real story is, is an underlying sentiment which controls how things play out. And for one week, it seems that the negative been balanced by the positive.
At least for this past week, that is.
And what that means is a see-saw week, resulting in a market tracking sideways.
In some respects, this would be normal for a market that its trends and moves are slower and more consistent, rather than the volatile market we are used to.
So...looking to the week ahead...
Is it going to be more of the same?
Or we going to see the normal colours of the ZAR come out?
Our forecast was updated late on Friday - and provided our clients with the expected trend for the week ahead, making it simple for them. Click here to get access to that
Best regards,
James Paynter
