MARKET NEWS 05/09/2019

Good morning

What started off as a trickle of good news for the Rand quickly turned into a torrent, and it was a joy to watch our exchange rate break through level after level as we surged stronger!!!

These are the mid rates as at 8:20 today:

USD = R14.78

AUD = R10.07

GBP = R18.07

NZD = R9.42

EUR = R16.29

Brent Crude = $61.05 per barrel

Market News

• What a day for the Rand yesterday!! We opened at R15.01 with cautious optimism suggesting that move below the psychological R15.00 barrier was on, but that level offered absolutely no resistance as we traded progressively stronger to hit R14.74. This is our best level since the 2nd of August and momentum suggests further gains are afoot. 
• So many factors contributed to yesterday’s move which explains how we managed to make such an impressive move after being stubbornly stuck around R15.30 for the past 4 weeks. On the local front the feelgood factor after Tuesday’s 3.1% Q2 GDP continued to support the Rand and this was bolstered by SARB Governor Lesetja Kganyago’s comment that he is confident SA will post an economic expansion in 2019. Annual growth will still be muted at 0.6%, but he said that even if the 3rd and 4thquarters delivered zero growth we would still see an annual growth rate of 0.3%. This calming of recession fears was good news for the Rand.  
• Internationally there was a raft of factors contributing to the Rand’s recovery, these including Hong Kong, Italy, Brexit and trade. From Hong Kong it was confirmed that the extraction order which threatened Hong Kong citizens being sent to China’s mainland for trail if arrested would be withdrawn. Millions of Hong Kong citizens had protested for 13 weeks against this bill, some flaring up in violence, and so the removal of this geo-political flashpoint was good for emerging market currencies.
• From Italy we had the surprise announcement of a new cabinet that manages to unite their 5-Star and Democratic Parties, and in so doing improve chances that Italy will be able to repair relations with European Union. Meanwhile in the UK Boris Johnson lost a vote calling for a snap election while opposition parties seized control of their parliamentary agenda which almost ensures an extension of the Brexit deadline to January 2020. These developments strengthened the Euro and Pound respectively and helped promote the risk on sentiment supporting emerging market currencies.
• Not to be outdone the trade war also chipped in with good news as Chinese officials confirmed that they had spoken to US Treasury Secretary Steven Mnuchin as well as trade representative Robert Lighthizer, and a firm date of 1 October is now in the diary for high level face-to-face talks in Washington. This was a boost for riskier currencies like the Rand while the Dollar sold off as a safe haven asset.  
• The following is from Reuters:  The safe-haven Dollar fell on Wednesday after global political worries eased with what markets perceived as positive news in Hong Kong, Italy and Britain. Edward Moya, senior market analyst at OANDA in New York, said the Dollar’s weakness was triggered by this “risk-on move in Hong Kong that gave Hong Kong equities one of the best moves in a few years.” That has boosted appetite for riskier currencies that have generally higher yields, he added. Moya said, “This is providing a little bit of unwinding of some Dollar bullish positions.”
• No local market data today but yesterday our whole economy PMI surprised to the upside by coming in at 49.7 points when a drop to 47 was expected.  
• Possible USD mid rate trading ranges in the Rand today are R14.65 and R14.95.