Disappointment that President Zuma was not forced to step down was palpable.
In a thinned out trade where the US and the UK were on holiday, the USD-ZAR’s move to the topside was perhaps a little exaggerated, although probably not wide off the mark on what was to be expected. Investors should get used to a very noisy, very volatile political climate where there will be uncertainty on how this all unfolds. Although it should be read positively that there appears to be broad-based support for a state-capture inquiry, such a judicial commission of inquiry and its credibility will depend on the terms of reference, who will be mandated to head up the inquiry, the levels of authority that it will be granted and who in particular is being investigated. There needs to be adequate oversight and above all, it needs to be expedited as the current political quagmire is undesirable for the country, does not lend itself to policy formulation, and detracts from confidence towards and within South Africa.
Then there is also the fact that the USD has gained a firmer footing. In the way of data today, the latest money supply and credit data will be of interest. The weaker the growth in these monetary metrics, the stronger the argument for a balanced economy that has not relied on credit-driven consumption to generate growth. It would form the foundation of why it would be premature to be calling for a weaker ZAR based on political noise alone. Whilst it is not particularly growth-supportive, it will still lend the ZAR some support.