Forex Market Report

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Good morning

Last week was a difficult one for the Rand as Eskom’s sudden and severe load shedding coupled with disappointing market data saw us slip by 3.67% against the Dollar. It would be nice to have a quiet week ahead so that the Rand could mount a recovery, but Wednesday’s Budget Speech is likely to keep us under pressure.

These are the mid rates as at 8:25 today:

USD = 14.05
AUD = 10.04
GBP = 18.14
NZD = 9.65
EUR = 15.88
Brent Crude = $65.54 per barrel

Market News

  • We may have lost 3.67% against the Dollar last week but it could have been much worse, this as we closed the week at R14.10 after recovering from R14.25 on Thursday. This morning we have made small inroads as we open at R14.05, largely due to international factors.
  • Eskom’s technical and financial woes were the main culprits in pushing the Rand lower last week and these will remain in the spotlight as we head into budget week. Various analysts are predicting many hard truths to be delivered this Wednesday as Tito Mboweni is known for his up front, “say it like it is” approach despite the fact we are in an election year. Eskom’s CEO (Phakamani Hadebe), Pravin Gordhan and Cyril Ramaphosa all threw Mboweni a hospital pass last week by telling reporters to wait for the Budget Speech when asked about Eskom’s rescue plan, so all eyes will be on Mboweni this week.
  • Mboweni has a difficult task in crafting a budget that will drive economic growth, prop up ailing SOE’s, appease labour demands and satisfy credit rating agencies all at the same time. And added to this is the expected downward revision of our GDP output due to local and global factors which will further dampen forecasts for tax revenue collection. Ramaphosa has repeatedly stated that the state’s resources are constrained, and that trimming unnecessary or ineffective expenditure is vital in freeing up finances that can be put to better use elsewhere, and the Rand will undoubtably react to the balancing act that the Budget Speech tries to pull off.
  • Interestingly Nedbank said in a note that they are now happy with the Rand’s positioning following last week’s drop as our challenges ahead of the Budget Speech are now priced in. This suggests that further downside risks may be limited, let’s hope they are right.
  • The Rand opened the week on the front foot largely due to the Dollar being sold off on trade headlines. US and Chinese officials are both reporting significant steps taken in last week’s Beijing trade negotiations which will be continued in Washington this week. Optimists are saying that this frantic pace in negotiations is an attempt to set up a Trump and Xi summit at the end of the month to deliver a trade deal, and the resultant “risk on” sentiment is seeing the Dollar pull back thus improving our exchange rate.
  • No local market data today.

  • Possible USD mid rate trading ranges in the Rand today are R13.90 and R14.20

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