ZAR reverses earlier gains on strengthening USD and weaker mining production

On Tuesday, the Rand opened stronger against the USD at R14.36. Lower than expected US retail sales were recorded in the US economy, this saw a weakening in the USD. The positive sentiment on the Turkish economy saw the Lira gain for the day. This continued the support in EM currencies including the Rand. This trend continued into Wednesday as the Rand opened at R14.27 to the USD and closed at R14.12 for the day.

The Rand started reversing gains it made on Thursday due to disappointing mining data and a strengthening USD. A decline in mining production is usually indicative of a declining GDP in South Africa as minerals make up a significant portion of the country’s GDP.

This, in turn, points to weaker economic prospects for South Africa. Thus, most of the gains for the previous two days were reversed as the ZAR closed at around R14.41 to the USD after breaking past R14.45 and hitting resistance at R14.47.

Friday saw the Rand ranging between R14.31 to R14.41 for most of the day. This came amid mixed signals from EM markets as the Chinese economy showed signs of a slowdown while positive sentiments continued on the Turkish Lira.

This trend continued on Monday with the ZAR between R14.30 and R14.35 in morning and afternoon trade. Interestingly, the ZAR recorded significant gains in mid-day trade, breaking resistance at R14.28 to peak at R14.25 to the dollar. This can be attributed to positive sentiment on the ZAR due to the pending budget speech on 24 October 2018.

Date	What’s happening?	Why does it matter?
Tuesday 23 October	EU Consumer Confidence	Increase in consumer confidence may be an indicator of medium import demand and can boost the ZAR due to SA exporting to the EU
Wednesday 24 October	Canadian BoC Interest Rate Decision SA Budget Speech	Higher interest rates will increase the CAD strength relative to the ZAR Government expenditure will impact the ZAR by either increasing or decreasing national debt
Thursday 25 October	EU ECB Interest Rate Decision US Durable Goods Orders	This will either strengthen (higher rate) or weaken (lower rate) the Euro relative to the ZAR Increased spending on durable goods is a useful indicator for medium-term consumer confidence
Friday 26 October	US GDP Q3	GDP data can increase (growth) the value of the USD or reduce (decrease) its value relative to the ZAR

– Justin Fortuin