Gold Fields

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Rand stays below 13, but remains under long-term pressure

The Rand opened slightly weaker against the Dollar last week at R13.0602. The Rand has since strengthened in early trade on Tuesday, with demand spurred by higher gold prices ahead of the second quarter economic growth figures, and is currently trading at 12.9502.

Gold Fields

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The Rand held below R13 as the Dollar weakened ahead of the European Central Bank meeting, as investors priced in the chance of future interest rate increases due to strong European manufacturing data.

The nonfarm payroll figures on Friday indicated further Dollar weakness. This could be an argument for the Federal Open Market Committee to delay increasing interest rates, as inflation has been stable at 1.6% below the Fed’s target of 2%, indicating a sluggish economy.

Gold prices reached one-year highs at $1,339, as investors shifted to buying safe haven assets amid worries that the situation with North Korea could escalate. Gold demand was supported further by Dollar weakness, as the Dollar-denominated asset is cheaper when foreign currencies are stronger against the dollar.

There has been a shift to investing in gold as investors price in a possible delay to interest rate increases in the US. The increase in gold prices was, however, not enough to buoy the JSE, as the local bourse closed lower on Monday as global markets remain weak.

1st contact forex

The Pound has extended losses against the Rand as UK manufacturing data came in below analyst’s expectations. The survey respondents noted that subdued business investment and concerns about the UK economic outlook had led to a lack of new work to replace completed projects. Pound weakness was further exacerbated by a fall in commercial construction activity, which fell at the fastest pace since the months following the Brexit referendum.

-Henning Joubert

Day What’s happening Why it’s important
Tuesday RSA GDP growth rate A higher growth rate than expected will have a positive effect on the value of the Rand as it indicates a strong economy.
US FOMC minutes The Federal Open Market Committee meeting minutes in which monetary policy is discussed and assessed.
Thursday EU Gross Domestic Product A measure of all the goods and services produced in the eurozone. A higher than expected reading will be positive for the Euro as it shows an expanding economy.
ECB interest rate decision A higher interest rate will have a positive effect on the Euro as it will attract more yield-seeking investors.
Friday UK Consumer Inflation Expectations An indication of the amount consumers expect inflation to change during the next 12 months.