It could be perceived that Trump is aiming to bring America to war. A few months ago, during the nuclear to and fro between America and North Korea (or rather Donald Trump and Kim Jong-un), Trump hit back with nuclear threats rather than being diplomatic. Now that North Korea has opted for peace, Trump has moved onto a historically more ‘reliable’ enemy of America, Iran. An alternative thought is that Trump is supporting the US fracking industry by lifting the oil price on the back of the geopolitical tension he creates.
Global News
- In an effort of goodwill, before the North Korean and American Summit, North Korea has freed three American prisoners, they were released on 9 May 2018.
- Trump pulled out of the nuclear deal with Iran. Steven Mnuchin said sanctions would return in “full effect” in 90 days, which could jeopardise billions of dollars worth of deals involving companies such as Boeing and Airbus.
- Trump also said that any country that continues to work with Iran would be penalised. This has the potential to create further international trade tensions as Europe has indicated its intention to recover the deal. Iran has also stated that they remain committed to the agreement.
- Oil prices bounced back after they dipped upon Trump’s Iran deal announcement. On Thursday, the price of Brent crude and WTI crude oil rose 3.2% and 3.0% to US$77/bbl and US$71/bbl respectively.
- Israel has struck back at Iran, hitting nearly all of Iran’s military infrastructure in Syria. This came after Iranian forces fired rockets at Israeli held territory.
- Last week’s US payrolls disappointed after posting 163 000 jobs when markets were expecting 193 000. Positively, unemployment is at a 17.5 year low.
- US core CPI gained 2.1% year-on-year in April, this remained unchanged from the March’s figures and was lower than market expectations which were at 2.2%. On Wednesday the producer price inflation slowed down more than expected over the same period. This setback shows that inflation is unlikely to overshoot the Fed’s target any time soon.
Local News
- In late April and early May, US dollar strength is testing the durability of emerging markets. South Africa and Turkey are both at risk due to their high external financing needs.
- However, following the disappointing inflation data in the US, emerging market currencies were able to recover yesterday (Thursday). The Russian rouble and South African rand were the winners with the rouble gaining 2.4% and the rand 2.0% against the US dollar. This appears to be a slight reversal in the recent “risk-off” stance taken against EM’s.
- South Africa’s economic growth for the first quarter of 2018 is most likely going to be negative. Mining and manufacturing production both had poor performances.
- The SACCI business confidence index has fallen for its third consecutive month. In April it came in at 96.0 after it was 97.6 in March. This is due mostly to the weak rand and low merchandising exports. However, the index has remained above 95.0 for the last six months.
- North West Premier Supra Mahumapelo has caused much confusion this week, saying that he would step down in the face of violent protests only to say that he was not stepping down just going on leave. This story continues to unravel.
- Our research shows us that, despite the aspects of uncertainty that persist locally, the global forces are starting to have the majority of the impact on our market and currency.
