Rand loses 1.3% alongside dismal Eskom financials and escalating trade war

There is a continued air of uncertainty in the global financial environment following Trump’s comments late last week. The President of the United States said he would impose further tariffs on China. Add to this the threatening tweet he directed at Iran and the result is wide-spread risk-off sentiment amongst investors.

This has spurred movement away from perceived riskier emerging markets, a move that will continue to place the Rand under pressure due to a lack of investor demand. Analysts attribute the Rand’s mini-slump primarily to the global environment as the Dollar remains on the front-foot against major currencies, especially against emerging market currencies.

While the global financial environment has taken centre stage, there have also been significant local developments that explain a portion of the Rand’s weakness. Yesterday saw Eskom post dismal results showing a loss of R2.3 billion for the year to end-March 2018. On top of this, irregular expenditure ballooned to R19.6 billion. These results paint a very dire picture for the ailing power utility as electricity generation is a critical cornerstone of any industrialised nation.

This week, the Rand is expected to fluctuate between 13.40 and 13.65 to the Dollar, with an expected mid-point of 13.50 to the end of 2018 with a range between 13.00 and 14.00.

Day	What’s happening	Why it’s important
Thursday 26 July 2018	PPI MoM and YoY   Expectation/forecast:   YoY: 0.30 % increase MoM: 0.10% decrease	The Production Price Index (PPI) for all commodities for South African consumption. All indices are based on producer prices at the point of production in the case of commodities produced in South Africa. A higher-than-expected reading should be taken as positive/bullish for the ZAR, while a lower-than-expected reading should be taken as negative/bearish for the ZAR.

– John-Edward Ferreira