Rand strengthens amid trade war abatement and stimulus plan announcement

This is evident in the fact that the Rand reached a low of R14.96 to the Dollar on Monday. By Thursday the Rand had gained to a high of R14.29, the highest it had been since August. Thereafter the Rand traded stable on Friday.

On Monday Donald Trump added additional tariffs on Chinese imported goods. Asian and emerging markets traded mixed on this information in anticipation of China’s reaction. A strong reaction from China would have seen further losses in emerging markets and would have subsequently pushed the Rand down.

However, the reaction from China was not retaliatory, and the Trump tariffs were below what investors expected. This improved the prospects of a resolution to the trade war pushed Asian markets higher on Tuesday. This then drove positive prospects for emerging markets as risk appetite strengthened. The Rand subsequently also gained against major currencies such as the Dollar and Pound.

Local economics also played a significant role in the strength of the Rand. A slower inflation rate contributed to a stronger JSE on Wednesday which then saw the Rand close higher for the day. Further gains were also recorded for Thursday as positive sentiment returned to the South African economy in anticipation of the president’s stimulus plan announcement on Friday. The Rand traded firm on Friday as the stimulus plan announcement drove further positive sentiment into the local economy.

The coming week will see the release of the US interest rate decision on Wednesday as well as GDP figures for the US and Britain on Thursday and Friday respectively. On the local front, investors will keep an eye on the consumer confidence data on Tuesday, PPI data on Thursday, and the money supply data on Friday.

Date	What’s happening	Why it’s important
Tuesday 25 September	BOJ monetary policy meeting minutes SA consumer confidence Q3	·         Monetary policy (increase/decrease of money supply) will indicate the strength of the Yen. ·         This will indicate the current consumer sentiment in the SA economy as well as the short-term strength of the ZAR.
Wednesday 26 September	US Fed interest rate decision	A higher Fed rate will decrease the money supply in the long-term and may drive some strength into the USD.
Thursday 27 September	EU business confidence SA PPI data US GDP data	Indicative of consumer sentiment and the medium-term value of the Euro. Indicative of the direction of overall inflation and the long-term value of the ZAR. The strength of the USD economy will drive the medium-term value of the USD.
Friday 28 September	British consumer confidence SA M3 money supply British GDP Q2	Indicative of the current consumer sentiment in the economy as well as the short-term strength of the GBP. A higher money supply will contribute to inflation and lower value of the Rand. The strength of the economy will drive value into the GBP.

– Justin Fortuin