It has been another see-sawing

It has been another see-sawing week for the Rand

Recession-busting GDP data released on Tuesday, combined with rising global demand for safe-haven assets like gold, helped the Rand rally to a two-and-a-half month best against the US Dollar.

It has been another see-sawing

Later in the week, concerns about the state of the economy going forward meant short sellers took advantage of profits to close out last Friday.

It was another see-sawing week as the Rand continued its recent fluctuations below the important 13.00 technical support mark. Data released on Tuesday showed agriculture, forestry, and fishing making strong contributions to the strongest quarter-on-quarter growth rate in a year.

While GDP was up 2.5% q/q, it should be kept in mind that this figure was coming off of a low base. This jump out of technical recession, however temporary it may prove to be, helped the Rand firm against the US Dollar last week.

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With tensions between the United States and North Korea continuing to rise, gold prices traded at one-year highs and further boosted the Rand. As a major exporter of gold, South Africa has been able to benefit from the stronger gold price, with the ZAR having gained about 5% in the past 30 days.

By Friday, however, a combination of mixed signals by the European Central Bank regarding its stimulus programme, together with weak local economic data, caused the Rand to retreat to 12.94 to the USD. The decline came as traders factored in worries about the economy to cash-in on profits before looking ahead to the new week.

The week ahead is fairly low-key in terms of new data on the South African front. However, focus has turned to the potential cabinet reshuffle that analysts believe to be imminent.

Day What’s happening? Why is it important?
Monday Hurricane Irma aftermath The second hurricane to impact the US economy in as many weeks. With US jobless claims surging after Harvey, the labour market will be further depressed by Irma, which will be seen as Dollar-negative (bearish). However, according to New York Fed president William Dudley, the long-term effect will actually see a growth in economic activity as rebuilding occurs.
Wednesday SA Business Confidence Index Q3 The BCI serves to indicate the business community’s attitude towards the current business climate. It measures their assessment or outlook on current business prospects and can also serve as a useful overview of the economy. No change is forecast, but an increase would be seen as Rand-positive and a decrease as Rand-negative.
Friday US retail sales Retail sales are widely perceived as an indicator of consumer spending; therefore an increase would be viewed as bullish for the US Dollar and a decrease as bearish.


– Philip Simpson
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