New Finance Minister and geopolitical pressures mount

Tuesday kicked off with US Treasury yields hitting a seven-year high. This was indicative of investors expecting the interest rates in the US to increase over the medium-term. This will, overall, be supportive of the USD. The IMF cut the global growth forecasts, which does not bode well for the future, especially in developing economies like South Africa.

The Rand was extremely volatile, with talk that Finance Minister Nene would resign after it came out that he had met with the Guptas. This did transpire, and the old SARB governor, Tito Mboweni, has been sworn in as the new Finance Minister. The ZAR strengthened after the announcement due to the high standing of Mr Mboweni.

The ZAR’s strength was, however, short-lived, with one of the largest selloffs in the last seven years happening in the US stock market. This hit the stock markets worldwide and funds flowed to safe-haven assets. The ZAR initially weakened, but on news that there was another stalemate in Brexit talks, the ZAR proceeded to strengthen from GBP-ZAR 19.55 on Wednesday last week to GBP-ZAR 18.87 at the time of writing on Tuesday.

Global currency movements in the coming week will be dominated by talks of Brexit, additional trade war tariffs that Trump would like to impose on China, and the possibility of a fallout between Saudi Arabia and the US regarding the presumed murder of a journalist. Overall geopolitical pressure is the top risk factor for the coming week.

Date	What’s happening?	Why does it matter?
Tuesday 16 October	UK Average Hourly Earnings	Expected to drop – this would be negative for the GBP, and could lead to more positive ZAR momentum.
Wednesday 17 October	SA Retail Sales UK and EU CPI	Expected to drop, if this does happen we can see this as ZAR-negative. Both UK and EU CPI is expected to rise, this will be supportive of those currencies and thus ZAR-negative.
Thursday 18 October	EU Brexit Summit	Any positive announcements from the summit between EU and UK leaders will be supportive of those currencies and thus ZAR-negative.
Friday 19 October	Chinese GDP Growth	Expected to drop, this will be indicative of a possible slowdown in the Chinese economy. Since China is one of SA’s major trading partners, this is ZAR-negative.

– Sebastian Steyn