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ZAR Forex Report - 01 March 2016

During and after the Budget Speech last week Wednesday, we saw the ZAR decline by as much as 3% as the general consensus seems to be that it was a good budget, but still failed to inspire investors…

This week we focus more on local news.

 As a positive, Finance Minister, Mr Pravin Gordhan was focused on cutting expenditure and putting an end to the increasing wage bill. Projections also showed that government debt is close to reaching its ceiling and will hopefully be more manageable and fall within the budget framework in future. While it was a “good” budget, investor sentiment – at least by judging on how the market reacted – was that it was not a great budget and that SA would more than likely still be downgraded to junk status. S&P quoted the obvious by saying the budget will not lead to an immediate downgrade and Moody’s commented that they are worried about delivery and implementation.

 As the market settled post-Budget, news broke of a developing power struggle between Pravin Gordhan and SARX tax chief, Tom Moyane over control of National Treasury. The ZAR weakened even more than during Nenegate, as it fell 3.9% on Friday – the most since the infamous crash following 9/11. This decline and chaos forced President Zuma to deny that he is at war with the finance minister and that the minister’s job is safe.

He market responded positively as the rained gained more than 2.5% against the USD – it was the best performer in among 31 emerging and major currencies tracked by Bloomberg.

 The Rand strengthened despite poor local data as trade and budget deficits were worse than expected. The Chinese central bank announced a fresh stimulus as it cut the reserve requirement ration for the 5th time in a year, boosting the case for emerging markets.

 Today we can keep an eye on local GDP figures and also the Barclays announcement as they plan to disinvest from ABSA.

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Global Forex Report - 01 March 2016

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