Weekly forex update – 10/11/17

What we know

This week saw the ZAR hold a fairly tight range between 14.10 and 14.25 as both local and global data was in short supply. As such it was really a case of catching one’s breath following the recent volatility and trying to assess what may lie in store between now and the end of the year. Interestingly, the most significant piece of news domestically arose from the literary sphere, as the attempt to block sales of Jacques Pauw’s President’s Keepers by the State Security Agency, struck a very sensitive chord both locally and abroad – once again, the brazenness of those in power was laid bare. Nevertheless, the ZAR did hold its own and in fact, seemed to potentially be bracing for a strengthening to test the 14.00 level again. Shortly before the time of writing, however, poor Manufacturing Production data – following weak Mining and Gold Production figure – contributed to pushing the ZAR closer to its weakest levels, currently at 14.26.

What others are saying

07 November 2017
RMB Global Market Research

“With almost nothing on the data and events calendar, the call remains for sideways trade this week. The wide range on USD/ZAR is 13.90-14.35, the narrower range is 14.00/02-14.25/29 — and we would be surprised if even this was challenged.“

Investec Morning Report

“Whilst SA’s economic prospects look concerning and are trending in the wrong direction, the country is unlikely to find itself desperate in the very near term and so for speculators, this remains an environment they can take advantage of.”

08 November 2017
RMB Global Market Research 

“…given the size of the moves in the start of this week, we are no longer sure that this level — which represents the top-side of the 14.00-25 range — will hold this week. The next resistance level is 14.35.”

“…local issues are of some concern given the growing rumours that President Zuma is set to announce free higher education sometime soon. At R40bn, the program represents around 1% of GDP and, unless the costs were somehow magically saved from other departments, would probably be enough to tip the rating agencies — S&P at least — into a downgrade on 24 November.”

BBC News – Brexit is ‘getting dramatic’, says EU
Article by Europe Editor, Katya Adler

“So, here we are, poised to begin round six of Brexit talks, and it might move you to raise an eyebrow or two to hear that the two sides can’t even agree what to call these meetings now: negotiating rounds, stock-taking exercises or an information exchange….These days I’d call them a dance around a standstill.”

 

09 November 2017
Investec Morning Report

“One should not treat December as a ZAR negative event based on just the current narrative in the press.  It is overwhelmingly negative and permeates all aspects of every-day life and it is almost exactly for this reason that one should be careful in being caught up in the herd.  Intra-day, we retain the view we have held for most of the week, namely anticipating further consolidation around these levels in a broader range.”

 

What we think

At the risk of being overly repetitive, we simply do not see from whence a positive ZAR catalyst may emerge any time soon. Be it the long-known issues around the country’s nuclear plans, looming downgrades and the ANC conference, or more recent announcements impacting on Freedom of Speech and the need to find R 40 billion to subsidise higher education in the country, prospects seem to be getting dimmer rather than brighter.

Our cautious stance remains: if pushed to choose between over or under 14.20 in the near-term we are still calling for a move higher. Being “anchored” by the fact the ZAR was at 13.40 just 3 weeks ago is not constructive and does no-one any favours. Assess the state-of-play as it exists NOW and make pragmatic decisions accordingly.

 

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Have a great weekend!