Today’s market commentary from Andre Botha, Senior Currency Dealer at TreasuryONE:
The story at the back end of the week last week and entering this week has been the resurgence of the US dollar, with the US dollar trading in the mid 1.11’s against the Euro. The reason for the recent strength in the US dollar has been the persistent concerns on the US-China trade front. With the Chinese and US tariff war that we saw an escalation off last week, the Chinese currency depreciated to the lowest level so far this year. With the pressure that is being felt by the Yuan, this has spilt through in the Emerging Market space and we have seen the Rand trading above the R14.40 level at the back end of last week, breaking out of the R14.20-30 comfort zone it held for most of last week.
The focus for the Rand at this stage is fairly and squarely on the Presidency, and when the announcement of the cabinet will take place. Should the market be happy with his appointments we could see the Rand slowly trudging back to to the R14.00 level and we target and break off the R14 level as a good opportunity to start buying US dollar. There is also an MPC meeting this week, where we expect the MPC to hold rates steady, but there will be attention paid to the MPC’s inflation outlook especially in relation to the recent petrol price increases and overall performance of the Rand of late.
The main driver at the moment is the US-China trade talks that have stalled and the market will focus much of their intention on that on a day where there is no top tier data that will be released. Looking at the choppy trade this morning of EM’s we expect the Rand to still be rather volatile with a sustained break of R14.50 signalling that the Rand could be heading higher.