MARKET NEWS 16/09/2019

Good morning

Things were going so well for the Rand as we banked a 3rd consecutive week of gains against the Dollar last Friday. But this weekend we became an innocent victim of severely heightened The Middle East tensions and we can only hope that the damage will be limited

These are the mid rates as at 7:30 today:

USD = R14.64

AUD = R10.06

GBP = R18.25

NZD = R9.35

EUR = R16.21

Brent Crude = $66.59 per barrel

Market News

• The Rand managed to post its best run against the Dollar in 18 months, this as the past 3 weeks have seen us carve out a 6.2% gain. On the 29th of August we were camped just below R15.50 to the Dollar but on Friday we touched R14.49 as the intraday best.  
• The Rand’s impressive gains last week were due to local factors (better than expected economic data coupled with Moody’s saying we would not be downgraded to Junk status in November) and international factors (marked thawing in US / China trade tensions coupled with the ECB announcing a significant Eurozone stimulus package). Risk on sentiment rippled through the market and the Rand benefited as a result.
• But unfortunately last week’s momentum went up in smoke over the weekend, literally, this as rebels in Yemen have claimed responsibility for multiple drone attacks on Saudi Arabia’s biggest oil production plant. The attack has cut Saudi Arabia’s production capacity in half, roughly 5.8m barrels of oil or 5% of global output has been lost, and while the Saudi’s are confident that a large portion of that capacity will be restored as soon as today this unprecedented act of terror has not only sent the price of oil soaring over 10% but also hurt emerging market currencies like the Rand.
• Fortunately the Saudi’s have vast stores of emergency oil at hand and are in no threat of defaulting on their supply contracts while repairs are completed, but the biggest threat to the Rand is now clearly the combined response from the Saudi’s and the US. While Yemen rebels say they are responsible the US has pointed the finger directly at Iran given the sophistication of the drones or missiles used, and we can expect Rand volatility as this story plays out. 
• The following is a tweet from Donald Trump and suggests some sort of aggressive retaliation:  Saudi Arabia oil supply was attacked. There is reason to believe that we know the culprit, are locked and loaded depending on verification, but are waiting to hear from the Kingdom as to who they believe was the cause of this attack, and under what terms we would proceed!
• No local market data today but we have vital events this week including our retail sales, consumer inflation and the FED’s interest rate announcement all on Wednesday, and then on Thursday we get our own interest rate announcement. 
• Possible USD mid rate trading ranges in the Rand today are R14.50 and R14.80.