Today’s market commentary from Andre Botha, Senior Currency Dealer at TreasuryONE:
Yesterday was a clear indication on where in the spectrum South African events are in relation to the movement of the Rand. While we expected the Rand to push slightly stronger on the back of the election results, President Trump had other ideas as the US and China started to trade blows again yesterday.
Both US and China, who were said to be close to agreeing on a deal a couple of days ago, have firmly taken steps to raise trade barriers again. The Chinese imposed tariffs on $60 billion dollars worth of US products in retaliation to tariffs being imposed by the US on Friday.
Trump, in retaliation, began the process of expanding U.S. tariffs to cover all $540 billion in Chinese imports the impact of this will reach the consumer with these tariffs expected to raise prices for everyday products such as cell phones, sunglasses, cameras and televisions.
Clearly, this is not good for the global economy as, the phrase global growth slowdown has shown its head again. We could clearly see global risk sentiment taking a nosedive as all the major indices took a turn for the worse and ended the day deep in the red.
The Rand was not spared in the risk-off sentiment and after starting the day in the mid R14.10’s it closed the evening session in the mid R14.30’s. This morning we have seen the Rand clawing back some of its losses and traded around the R14.30 level, however, the market is sitting cautiously waiting on any news from the trade deal between US-China. For now, the election results have taken second place in importance for Rand moves.