Brexit, disputes between US and China, Moody's report on Eskom's financial results.
The past week, the rand lost 3.24% against the US dollar and breached the R15/$ mark.
The currency was at the mercy of market reaction to trade war fears, disputes between US President Donald Trump and the Federal Reserve Bank, as well as a Moody’s report on Eskom’s dire financial results.
The past week, the rand lost 3.24% against the US dollar and breached the R15/$ mark. The currency traded at R15.25 against the USD and R17.09 against the euro. The currency was at the mercy of market reaction to trade war fears, disputes between US President Donald Trump and the Federal Reserve Bank, as well as a Moody’s report on Eskom’s dire financial results. More short-term volatility is expected from the currency as investors try to make sense of the various news factors.
The purchasing managers’ indices released in the past week indicate that the global manufacturing sectors remain challenged by headwinds associated with the US-China trade battle, Brexit and various other factors. Continuous stress between the US and China is having a negative effect on global growth forecasts and markets are starting to price accordingly.
The JSE all-share index (ALSI) lost 1.30% for the week. The financial sector was the biggest loser, driven down 4.11% on the back of the weakening currency. Resources gained 1% for the same reason.
In the US, the S&P 500 lost 0.5% in value. In Europe, the FTSE 100 lost 2.07% and on the mainland the CAC40 closed 0.6% softer, with the DAX 1.75% in the red.
The Bank of England held rates steady this week but warned of a one in three chance of recession by early 2020 due to heightened uncertainty over Brexit, even if a deal is reached with the EU. If there is a no-deal Brexit, the pound will fall sharply, inflation will rise and growth will slow further, Governor Mark Carney predicted.
In the East, the Shanghai fell 3.25% and the Nikkei traded 2.34% softer. These markets are the main target of US tariffs and are now bearing the brunt of the trade wars. Spill overs from the US-China trade war is negatively impacting Asian exporting nations such as South Korea, Taiwan and Japan.
This week, the currency will be closely watched, and the rand may strengthen quickly in response to any good news
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