Yesterday’s forex report questioned whether Finance Minister Enoch Godongwana had a trick up his sleeve when it came to his annual Budget Speech.? As it turns out he performed one of the most difficult magic tricks of them all, the disappearing act!!!
These are the mid rates at 6:55 today:?
Brent Crude = $75.77 per barrel
- Whether the last minute postponement of yesterday’s Budget Speech is a good or a bad thing remains to be seen but in the very short term the Rand’s reaction was predictably negative.? After opening the day at R18.41 to the Dollar we had made it to R18.33 just before the scheduled speech, but with it being postponed that rocked the market with our exchange rate plunging to R18.55 instantaneously.?
- Democracy at work or the first signs of real cracks in the GNU, we’ll just have to wait and see, but the unprecedented postponing of our Budget Speech till the 12th of March really did take the market by surprise yesterday.? Having 10 parties in the coalition government was always going to present its challenges but it would appear that yesterday’s events boiled down the ANC trying to force through a 2% hike in the VAT rate to 17%, a move that would have far reaching effects for the South African consumer and one that the DA would not rubber stamp.? The stand-off could not be resolved in time and so the speech has been pushed back to March in the hope that a consensus budget can be reached.?
- At first glance the optics of yesterday’s fiasco don’t look good, and the Rand’s reaction is clear to see, but the following from Business Day paints things in a positive light:? Hendrik du Toit, founder & CEO of Ninety One, said it was important to put the postponement of the budget after differences over tax hikes in perspective.? “This is the reality of coalition politics, this is our government of national unity (GNU) in action. There is no time to panic. This is democracy at work. The minister is part of a unity government and he and the president have respected that.? The minister has wisely postponed the budget until March 12, which was the traditional budget month for SA, and there is enough time to hammer out sufficient consensus among the GNU partners.”
- On the international front the Dollar Index has traded sideways around the 107 mark while the market waits for more concrete details on Trump’s widespread tariff agenda, an agenda that he added timber imports to yesterday after including autos, pharmaceuticals and semiconductors on Tuesday.? Also, after an initial relief rally last week on prospects of a Russia/Ukraine peace deal the market is becoming a little unsettled thanks to escalating political tensions between the US and Ukraine, tensions that have seen Volodymyr Zelenskiy trading barbs with Washington while Trump has suggested that Ukraine “should never have started it”, and that Zelenskiy is a “dictator without an election.”? The Dollar will remain supported as long as these public tensions persist.?
- Another source of Dollar support was the latest FED minutes released yesterday which show that the central bank is pretty much on hold when it comes to rate cuts until further progress is made in bringing US inflation down to their 2% target.? The minutes made specific reference to the “considerable uncertainty” around Trump’s trade and immigration policies, and how time will be needed to assess their respective impacts on the economy and inflation.?
- No local market data today.
- Possible USD mid rate trading ranges in the Rand today are R18.40 and R18.70.
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