Rand still riding on top of Economy Waves

It is a pleasure to share some positive news for a change as the Rand is currently doing better than most give him credit for.

Only four weeks away from South Africa’s National General Election, the pre-polling campaign machines of each political party are still not in full-swing as the most of the street corners bear lonely witness. Though political efforts are mounting and elevating the levels of tension and discourse, the rhetoric is becoming increasingly polarising and will once again be in full view today as the protests in Alexandra migrate to Gauteng’s business hub of Sandton.

Whether that ultimately impacts on financial market sentiment is at this point uncertain!

If it does, it will only be marginal though. A more likely driver will be developments and data from abroad that might offer some perspective on the outlook for the US business cycle. This morning, Asian markets find themselves on the front-foot after some better than expected US payroll data as the economy added another 196 000 jobs while the unemployment rate remained flat at 3.8% and inflation remained same as well. Although that means that the Fed should be in no hurry to hike rates as reflected in US bond yields dipping and the US Dollar retreating slightly off its best levels, it does still mean that amongst the safe-haven hard currencies, it retains some attraction.

More supportive for the South African Rand is the further rise in the prices for industrial metals, which have been given a further boost by the recovery of the platinum price. This is indeed good news for the Rand, and although it comes accompanied with an oil price, which is also rising, the jump in metals and other commodity prices will help shielding South Africa’s terms of trade to leave the Rand neutral at worst and slightly bullish at best. Given the current backdrop, the Rand’s resilience could well extend a little further, the political backdrop notwithstanding.

Those four weeks to come, paired with Moody’s delayed rate decision may represent the quit before the storm though, as the ANC’S NEC has plans in their drawer, which will be hardly palatable for the local and international business community, ranging from nationalisation of the South Africa Reserve Bank via constitutionally blessed Land Expropriation without compensation to replacing Cyril Ramaphosa with his former election rival Dlamini-Zuma.

Well let’s watch the circus while the lights are still on….

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