Rand hits strongest level in a month as emerging markets climb off the back of a softer US Dollar

US data released on Friday reflected slower-than-expected wage growth in their economy, which in turn made it less likely that the Fed would be adopting a more aggressive stance on hiking interest rates going forward. This has translated into Dollar weakness. This allowed emerging markets to find some resilience with the Rand being the third best performing emerging market currency in the last week, just behind both the Argentinian and Mexican peso.

Although the environment may seem positive at the moment, any significant Rand bulls will be kept at bay by the imminent trade war between China and the US. It began in earnest on Friday in the form of the US’s implementation of USD34 billion in tariffs against China. The uncertainty on the global stage makes markets more likely to be risk-averse. This will not play out positively for riskier emerging markets.

Locally, “Ramaphoria” has waned in the shadow of weak fundamentals, with the economy contracting more in the first quarter of 2018 than it has in the past nine years. It must be made clear that current levels achieved by the local currency are as a result of international factors and cannot be defined as Rand strength. Structural challenges, weak growth, growing redistributive commitments, as well as the land debate, are shackling the local currency, meaning that it is very unlikely that the Rand will move below the 13.00 level anytime soon.

Going forward into the week the Rand can be expected to fluctuate between 13.30 and 13.50 to the Dollar, with 13.30 marking a psychological line of support.

Day	What’s happening	Why it’s important
Tuesday 10 July 2018	SACCIS Business Confidence Index	This an index that measures business confidence. Business confidence is forecasted to decrease and results outside of this expectation may move markets in a directly proportional direction.
Thursday 12 July 2018	Mining Production YoY and QoQ	The Mineral Energy Complex is our number one driver of exports and as such this data is important. Better-than-expected performance will mean positive market movements and vice versa. Mining production is forecasted to decrease.
Thursday 12 July 2018	Manufacturing Production YoY and QoQ	Manufacturing is a big driver of consumption/expenditure in the economy and as such is a market-mover.  Better-than-expected performance will mean positive market movements and vice versa. Manufacturing Production is forecasted to increase slightly.

– John-Edward Ferreira