Rand strengthens on weaker US

Rand strengthens on weaker US and UK data

Despite its weak start last week, the Rand ended off on a strong note against most of the major currencies.

Rand strengthens on weaker US

On Monday, a proposed merger between SAB Miller and AB InBev seemed to have stalled, and many traders read the impasse as Rand negative. However, on Tuesday the SAB board accepted an increased offer of £68bn from AB Inbev. The deal brought about a record shattering merger that accentuated Rand strength thanks to the capital flows that came with the settlement.

On Wednesday the Rand began to strengthen significantly. The SAB AB InBev merger, worse than expected UK and US data, all contributed to this strengthening. The data coming out of the US was so disappointing that it has effectively put talks about a 2015 rate hike to bed. In Europe, data remained negative which may pave the way for further quantitative easing (QE) measures to be implemented in the Eurozone. These factors, together with better than expected Chinese data on Monday and a rally in commodity prices helped to keep the Rand on firm footing through the mid-week. As the week came to an end the Rand kept powering on, largely due to a sell off of US Dollars.

What to look out for this week? There will be some important South African data releases with both CPI and retail sales figures to be announced. On Thursday the European Central Bank (ECB) will announce what they intend to do with their interest rate. Market participants are also hoping for some indication as to the ECB’s stance on expansion of QE.

-Sebastian Steyn

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