The rand has held up well in recent months, despite political volatility and the downgrade of South Africa’s sovereign credit rating by two rating agencies. This has prompted new finance minister, Malusi Gigaba, to say that Jacob Zuma’s reshuffle of his cabinet has not had much impact on the rand or South African markets.
However, most emerging markets have fared well over the past couple of months, as shown by the Turkish lira gaining in value even as Recep Tayyip Erdoğan has consolidated his political dominance. Last week, the US dollar strengthened and emerging markets weakened – if this trend continues, the effects of the downgrade and cabinet reshuffle on the South African economy could begin to bite.
- In the US, the Federal Open Market Committee (FOMC) kept interest rates on hold. The US dollar gained value following this news and closed the week trading at 1.10 to the euro and 1.30 to the pound.
- Gold fell by 3.36%; Brent Crude Oil lost 4.75% because of concerns about oversupply and reduced demand.
- In April, the US created 211 000 jobs and the unemployment rate dropped to 4.4% year-on-year. Employment growth is expected to moderate over the coming months, as the US approaches full employment. Wage growth slowed down to only 2.5%.
- In France, Emmanuel Macron the centrist candidate won the French presidential election on Sunday, betting
right-wing candidate, Marine Le Pen.
- In the Eurozone, GDP growth came in at 1.7% year-on-year and the unemployment was flat at 9.5% in March. Greece and Spain both struggle with high unemployment rates of 23.5% and 18.6%.
- In the UK, the Producer Market Index (PMI) had a strong month in April, overshooting expectations of 54.0pts to come in at 57.3pts. The main reason for this was an increase in exports, with UK manufacturers benefiting from the weaker pound.
- Emerging markets had a poor week as the US dollar strengthened. The Russian ruble fell 1.75% and the Mexican peso lost 0.88%.
- As emerging markets weakened so did the rand, declining by 0.36%, to close the week at R13.43 to the US dollar.
- The JSE All Share Index depreciated by 0.44%.
- Barclays PMI fell from 52.2pts in March to 44.7pts in April.
- The National Association of Automobile Manufacturers of South Africa released poor vehicle sales data, April sales dropped by 13.4% year-on-year, compared with an increase of 2.1% in March. New vehicle exports decreased by 25.5%, new car sales by 13.7% and light commercial vehicle sales by 13.3%.
- In recent weeks, Deputy President Cyril Ramaphosa has become more politically visible. It would seem that he and Nkosazana Dlamini-Zuma are the front runners for the ANC Elective Conference in December.