US jobs data on Friday could cause major swings in the high-achieving rand on Friday, with an analyst seeing the rand moving between R13.55 and R14.00 to the dollar.<\/p>\n
This comes as the rand remained at levels last seen in October last year on Friday, as elections continued to show the ruling African National Congress (ANC) losing favour in South Africa\u2019s urban areas and after the UK cut key rates on Thursday amid an economic fall-out resulting from its vote to exit the EU.<\/p>\n
The rand reached a low of R13.67\/$ on Friday, and traded at R13.68 by 10h20 on Friday morning. It was also trading at R17.97 to the pound and R15.26 to the euro.<\/p>\n
\u201cThe rand went out on its own yesterday morning outperforming all of our emerging market peers and further gains in line with risk assets are on the cards if global liquidity remains or even extends further,\u201d Wichard Cilliers, head of dealing and director at TreasuryOne, said on Friday.<\/p>\n
\u201cThe rand gained against all majors, either because the market was happy about the election outcome or the (Bank of England) BoE\u2019s delivery,\u201d said RMB analyst Isaah Mhlanga on Friday.<\/p>\n
\u201cIt\u2019s difficult to tell, but it\u2019s all good,\u201d he said. \u201cSouth African politics will never be the same again.\u201d<\/p>\n
Even though South Africa\u2019s democracy is relatively young, Umkhulu Consulting\u2019s Adam Phillips believes \u201cwe have shown the world that we have an excellent constitution\u201d.<\/p>\n
\u201cThe results have shown that democracy does work and even though the votes in some areas are too close to call, the Democratic Alliance (DA) and EFF have given the ANC a bloody nose,\u201d he said on Friday.<\/p>\n
The DA looks set to take Port Elizabeth from the ANC, while retaining Cape Town in the elections, with possible coalitions expected to emerge in Tshwane (Pretoria) and Johannesburg, where the DA and ANC are neck-to-neck.<\/p>\n
\u201cThe elections are certainly heating up in the main metros as coalitions look like the likely way forward, and many smaller parties are set to become king-makers as parties with the bigger share of the votes, court their alliance,\u201d said Cilliers.<\/p>\n
The BoE tried to cushion the UK economy from the impact of the Brexit vote, by cutting its bank rate from 0.50% to 0.25%, adding \u00a360bn in new stimulus and \u00a310bn corporate bond purchases, and announced a new term funding scheme to provide cheap funding to banks, explained Mhlanga.<\/p>\n
\u201cThis is a continuation of global central banks\u2019 willingness to boost confidence and support economic activity,\u201d he said.<\/p>\n
Cilliers sees the rand trading between R13.55 and R14.00 on Friday, \u201cwith large swings possible at 14:30 when the US jobs data comes out\u201d, he said.<\/p>\n
The US labour market will be in focus when the non-farm payrolls number and other vital jobs data is announced. \u201cThe market needs to believe that the significant bounce back in July is sustainable and that the May number was truly an outlier,\u201d said Cilliers.<\/p>\n
\u201cTo buy into the US Fed\u2019s constant beating of the potential rate hike drum, we would need another strong number accompanied by an improvement in other sectors of the US economy. A weak number would further dent aspirations of a US interest rate hike this year.\u201d<\/p>\n
\u201cThe bias should be to the lower side though as the positive sentiment from the local elections and the rate cut from the BoE continues to filter through,\u201d he said.<\/p>\n
However, with the European holidays in full swing, Phillips said \u201cthis could cause some interesting volatility\u201d.<\/p>\n