The week concludes on few new notes. The lack of fresh geopolitical news to emerge out of the Ukraine and Gaza, where the concerns to have arisen have now been more fully priced in, but also the slight slip on US data of late have proven to be a double negative for the US Dollar. While the dollar index has not lost all that much ground in the short term, one must bear in mind that this is due to a more recent underperformance of some of the major currencies. This dollar index position does not capture the more positive performance being put on by the Emerging Markets specifically, where moderating G4 rate expectations can help to prop up riskier currency positions.
Meanwhile, yesterday’s Eurozone GDP growth slowed to 0.7% (year-on-year). This describes very weak demand conditions in South Africa’s largest trading partner(s) and so this is a risk to what remains much needed narrowing of the cumulative trade deficit. Pressure on the current account balance is seen as an on-going fundamental risk to the Rand. Prospects for a recovery in exports are further convoluted by the domestic productive sectors that are still under heavy strain in the wake of the recent strikes in the Platinum Belt and the Metal Sector. The mining production data yesterday remained in contraction at -5.7% (year-on-year) in June. a direct result of the ongoing efforts to bring production back on line. The after,ath of the five months strike will still have its effects in the short term, but should return to normal in the fourth Quarter of the current financial year.