Interims data promises more than it will be able to hold

It promises to be a quieter end to the trading week with less in the way of data available for investors to trade on. Yesterday, the USD staged a mild recovery on the back of some slightly better economic data. Focus through the week ahead will turn to the local release of the SARB’s quarterly bulletin which will contain the latest Q1 current account data. As the cumulative trade deficit has narrowed through the first half of the year, we would expect the current account deficit to have done the same and narrow from the latest reading of -5.1% of GDP. With the event risk of the credit ratings agencies now behind us, the probability is high that the current account data through the week ahead will be generally more supportive of the ZAR.

The full effect of the rate hikes and the higher commodity prices will only be reflected in the Q2 data. That being said, for the time being, much of the direction on the USD-ZAR is being derived from the USD itself although it would be fair to point out that the ZAR’s returns through the course of the past week have been second only to the likes of the BRL. That could represent a catch-up performance following the decisions of the ratings agencies to reaffirm SA’s credit rating, but it also reflects a good reason why the USD-ZAR might be in for some profit taking as we head into the weekend.

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