What did we say last week?
We thought perhaps we would have a quiet week ahead of us with a lack of economic events, but concluded with this:
"But no. That is most probably asking too much. The Rand can create its own triggers. Or the politicians do it. "
And what do you know...
A week filled with blunders, corrupt politicians, and bad news.
From the new (and potentially destructive) Mining Charter released the previous week...
...to the Current Account Deficit
...to the Public Protector recommending changes to the Constitution, which would see the currency unprotected
...to Zuma's afternoon of lies to parliament after the ConCourt decision, with no one able to challenge him
Just when it was all quiet, it became a circus again.
With the Rand being the loser - in strength, and international standing.
BUT...our forecasts did give an accurate prediction for the way ahead - one of the few positives we can take out.
So, lets review how this unpalatable week actually happened.
How It Happened (19-23 June 2017) |
Our forecast landed on time on Friday evening, and showed us the expected track for the week ahead.
The outlook (see below - click to enlarge) gave an outlook that South Africans did not want to see. The ZAR was due to bottom out shortly from its 12.80 position in the 12.78-12.69 zone before heading higher into the R13/$ and above areas...
Click to enlargeAnd when Monday morning rolled around the market was still trading at R12.80/$ by 8am. The week had begun...
...and now to see what it held in store.
Initially, the Rand made a very good start, just as per our predictions. It moved neatly to 12.75 to the greenback before things began to turn around.
Unfortunately, when things "start to turn around" with the Rand, there is often trouble just around the corner.
And there sure was.
During the course of the afternoon, the market sky-rocketed, losing more than 20c in a matter of hours!
What had happened?!
This was put down to the biggest news of the day which had just hit: Public Protector Busisiwe Mkhwebane (thankfully I only have to type her name, not pronounce it...) recommended changes to the Constitution that would see the removal of a clause to protect the currency.
This caused the Rand to sink all of 1.44%...
The SARB got involved, declaring that the Public Protector's statement "falls outside of her powers and is unlawful", but the damage had already been done.
Mkhwebane also wants the government to recover public funds "unlawfully" given to Absa Bank. She believes ABSA owes the government a princely sum of R1.125bn, while ABSA maintains it has paid all it owes.
At the end of the day, the Rand had hit R13.05/$, and who knows what was coming next?
Monday night and Tuesday morning brought some brief respite as the ZAR managed to hold its ground at R12.97 when business opened.
But...
...no one really expected the market to last long before another spike of repercussions hit.
And it didn't.
Around 9am the market bottomed at 12.94 for Tuesday and began cruising upstream pretty sharply.
By mid afternoon, it was over R13.10/$, and things were not looking good.
The Rand's loss of ground on Tuesday morning was put down to ratings agency Moody’s release of a report criticising the new Mining Charter. Moody's joined Fitch Ratings in slating the controversial charter as harmful to the South African economy...this being pretty much the understatement of the entire year.
After taking another battering, the Rand ended up closing over R13/$, with plenty of jumpy and volatile movement.
A further widening of the deficit took it to 2.1% of South Africa's GDP - R16bn from where it was in the last quarter of 2016.
In other news, Oil dropped below 46$/barrel yesterday, its weakest level since November 2016, as oversupply fears returned.
Anyway, moving on to Wednesday.
Things actually went fairly flat for most of Wednesday, as the market daily range was only about 13c total.
However, it had some crucial movement.
Around midday, the Rand headed up as high as 13.135, which took it into our target area from Friday's forecast.
So, a very satisfying forecast, predicting the correct target area for both the topping out and then the move up - I trust this gave our subscribers some really good benefits.
The market did retrace after that, and by the time the day ended, it was more settled around R13.07 to the USD...
The penultimate day of the week arose...
Where to from here?
The big event of the day was the ConCourt ruling - they were set to make a decision on the opposition party's application to hold a secret vote of no confidence in Zuma...
This would supposedly 'protect' those who wanted to vote against Zuma, but were afraid of the consequences if they did so publicly.
The Rand sat for Wednesday night and early hours of Thursday around R13.08/$...
...however, from early hours of trading, the market began to strengthen.
By the time business opened, R13.02/$ was the rate.
By 10am, it had touched R12.98.
Where was this strength coming from amidst the turmoil?!
In one tremendous spike, it shot down as low as R12.93!
The ConCourt ruled that a vote could take place, and it would be the Speaker of Parliament to decide on the secret ballot...whether this would happen, is another story.
As for Zuma's afternoon in the circus ...er parliament...lets rather stick to talking about the market...
The Rand kept volatile the whole day, but also positive, and by the end of the day was trading below R12.95/$...it had been quite a day, but a productive one for the Rand in the end.
Friday.
The last day of the week.
Choppy waters greeted us again on, but it was clear that the focus had moved to the following week already, and the Rand was going to have a quieter day.
In amongst the choppiness, it made its way to R12.92/$, and hung their solidly until the end of the day.
Our forecast was sent out to our subscribers, and the week had come to a close...
The Week Ahead (26-30 June 2017) |
...it was time to breathe a sigh of relief, as the Rand could have come off far worse after such a torrid week of events.
Its a strange old game.
Even with the worst events, the Rand came through pretty strong. It seems so counter to what one would expect yet it happens time and again.
So as we look to the week ahead...what does it hold?
Once again, it looks void of events.
But as we just saw, scheduled events don't seem to count for much.
It is the 'unscheduled' (or are they secretly scheduled...?) events that you have got to watch out for - and that is why it is impossible to base any predictions on events, news and financial data.
So into the new week we go.
All the best,
James
