The ZAR opened at R17.35 and continued to strengthen on Tuesday, breaking the R17.21 mark at noon. This was mainly driven by weakness in the Pound where political uncertainty around Brexit and the election of the new prime minister continues to dominate sentiment. The Pound lost significant ground against the USD on the same day.
The ZAR gained ground against the USD this week as risk appetite revives in Wall Street. The expectation that the Federal Reserve will lower interest rates at the next interest rate decision is the main driver of risk appetite. This dynamic also played out in the stock market as the JSE All Share Index inched up early last week and remained up for most of the week.
On Thursday, the South African Reserve Bank cut interest rates by 25 basis points. This, and the return of risk appetite in the US, buoyed the JSE. A stronger stock market will strengthen the ZAR in the medium-to-long-term if all else remains equal.
The ZAR closed at R17.29 to the Pound yesterday and remains flat in early trade today. Traders will be keeping an eye on this week’s US GDP data, South African inflation data, credit and money supply data.