Today’s market commentary from Andre Botha, Senior Currency Dealer at TreasuryONE:
With the South African election, a thing of the past and the results have been tallied, the outcome of the election is mostly in line with previous projections. As forecasted the ANC got less than 60% while the DA lost a bit of ground with the EFF gaining a little. What does this all mean for the Rand? In short, the outcome brings policy certainty back into the market which coupled with the notion that no coalition government will be formed will inject some positivity for the Rand which could help the Rand looking to break lower and maybe test the R14.00 level.
However, there are opposite forces currently in the market, with the market waiting for Chinese retaliation after the US imposed a fresh round of tariffs on the Chinese. The break down in the current trade talks leave a void which can only be filled by uncertainty, which could make the current Rand strength short in duration. The worrying sign this morning is that the US dollar is currently a bit softer, which would normally equate in a stronger Rand but we have seen the Rand moving in an opposite direction.
Some market risk for EM’s could also be coming from Turkey, who releases their current account figures later on today. We have already seen the Lira being volatile in early morning trade, which could spill over into EM markets should the number be weaker than expected.
We believe the Rand to trade in a narrow band between R14.15 and R14.40 as we await the hangover from the local elections to spill into the markets. The key event after the election is the announcement of the new cabinet which could give the Rand short term impetus.