What a week for the Rand, with another rollicking performance against the Dollar, Euro and Pound. As a wide range of global events took hold of the headlines, the local unit just quietly continued it’s good form against the majors.
All of a sudden, we were back beneath R17 and R20 to the Euro and Pound, with the ZAR having R14 to the Dollar in its sights too.
It is quite amazing how the fortunes of a market can change so fast.
For importers and consumers, they are asking for it to continue – but as for exporters and foreign investors, they have a very different view, wishing for a turnaround.
It is always worth remembering that there is someone on the other side of the market. You will seldom be on one side for long, as the fortunes and trends fluctuate. Let’s get into a full review to try get some insight into the weeks ahead.
Key Moments (30 Aug – 3 Sept 2021)
And here were the biggest headlines of the week:
- Land Expropriation – the most controversial of all new law being considered in SA reached a critical turning point this last week…
- US Jobs – the pandemic-restriction-fueled job situation is not over yet, as jobs numbers again disappointed horribly…what next?
- Afghan Evacuation – Biden’s moment of trial has ended in a shameful exit as the US left with their tail between their legs, leaving desolation, millions of Dollars – and Americans behind…
To start, the Rand began the week around the R14.71 mark to the Dollar, R17.35 to the Euro and R20.25 to the Pound.
And those were pretty much the highest levels we saw for the whole week, as one way traffic was pretty much the order for the majority of the 5 days.
By Friday, we were breaking well below the physiological levels of R19 and R17 for the Pound and Euro.
But what had transpired in the week? How had this come about?
It was a rollicking week, starting with the drama over in the Middle East – as the US tried to complete their evacuation before the Taliban-imposed 31 August deadline, under fire from ISIS and tension between the Taliban and all American citizens. There were also other country’s people there, but none more than the US, who had been on Afghan soil now for 20 years.
It was Biden’s moment of reckoning as President – whether he would show a steady hand and be able to manage the situation, rather than let it dissolve into an embarrassing exit…
…which unfortunately is just what happened.
The US largely ‘fled’ Vietnam-style rather than an ‘ordered exit’, as pressure mounted especially from ISIS, and time ran out…
It meant equipment, weapons, kit, vehicles and aircraft were left behind in the chaos, costing the US tens of billions – and handing the Taliban some valuable resources for their control of Afghan territory (with Iran likely to be a beneficiary as well).
In the end, the US military did get out by the deadline, but in a manner that will go down in history as one of America’s most embarrassing military blunders, despite its military prowess. What a complete mess – how quickly things can change under weak leadership!
And then in other news:
- Locally, the Section 25 Amendment to the the constitution has been one of the most debated pieces of law in the history of SA – and this week, the debate reached a tipping point. The ad-hoc committee on Section 25 adopted a bill to amend the Constitution to allow expropriation without compensation with only ANC MPs voting in its favour. This is a major moment, but also not by any means confirmed that there will be expropriation without compensation – as this bill will now be put before the National Assembly for adoption, where it is unlikely that the ANC would muster the required two-thirds majority to pass the bill. However, this is step 1, and that is step 1 toward one of the worst decisions any country could make if they want to attract foreign investment which SA needs so badly. What will be coming next in the their communist agenda?
- Back on US soil, Biden had more to worry about than just what was going on on foreign shores, as the economic recovery continued to show cracks. The jobs report on Friday was a shocker, as we saw the expectations of 720,000 new jobs be dashed, as the number came in at a paltry 235,000! Unemployment rate still fell to 5.2% in line with estimates, but these numbers were concerning as the country heads toward fall and winter, the quieter economic period of the year.
- And another piece of news was the incredible chip shortage that was affecting so many businesses, as car manufacturers continued to be some of the hardest hit. Ford announced that their sales were down 33% from a year ago, as they simply cannot make sufficient cars, due to those shortages. This is going to be a key component to so many industries – which country will act first to become a powerhouse in manufacturing these?
And then getting back to the local unit, we saw the latter half of the week get a little volatile, especially around announcements of US Jobs and other releases.
Thursday saw the Rand lose ground – only to grab it back on Friday.
Final closing figures in SA markets was with the Rand below R14.30/$, and R17.00 & R19.80 to the Euro and Pound.
It had been a quite amazing few days as the Rand blew past expectations… …but this next week it all starts over again.
The Week Ahead (6-10 September 2021)
Believe it or not, we are into September already – where has the year gone. It has gone by in a flash, but there has been plenty happening – and we are watching with anticipation to see how the Rand plays the last 4 months of this year out.
Here is the few events we are watching this week:
- SA – GDP Figures, Current Account
- US – Jobless Claims
- UK – Balance of Trade, Goods Trade Balance
So not a huge lot of economic news. Monday is a holiday in the US (labour day) which could make for a quieter day, but don’t expect that to impact on the volatility for the week. The Rand has been on the front foot the past couple of weeks, but as we have learnt many times, the Rand is never a one-way bet! We will continue to try and filter out the noise and simply follow what the charts themselves are telling us with our Elliott Wave based forecasting system.
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To your success~ James Paynter