South African Rand (ZAR) Broadly Softer ? Trade Data Ahead

With a host of influential ecostats still to be published this week, the Rand began trading by softening against peers like the US Dollar, Pound and Euro. The uncertainty of the Greek bailout negotiations, persistent energy supply concerns in South Africa and below-forecast domestic data all contributed to the Rand’s underlying weakness. Another cause of the Rand’s softness was the wage dispute raging between South African public sector unions. A 10% hike is being demanded, prompting this response from economists with ETM Analytics; ‘The fact that government hasn’t made any tangible progress on this matter remains a concerning overarching factor for the Rand.’ The US Dollar to South African Rand currency pair was trading in the region of 12.1440, up 0.9% on the day’s opening levels, while the Pound Sterling to South African Rand exchange rate was achieving 17.9460, 0.3% higher than Monday’s opening level.

On Friday Federal Reserve Chairwoman Janet Yellen also implied that US interest rates will be raised at some point this year. Old news, but still an assurance that reduced demand for higher-risk and emerging-market assets like the Rand. Tomorrow the Rand could experience volatility as a result of South Africa’s trade balance data. Economists have predicted that the nation’s deficit narrowed from -24.22 billion Rand in January to -5.7 billion Rand in February. If this estimation proves accurate, the Rand could rally. Tuesday’s data will be followed by a number of domestic ecostats on Wednesday, including the KAGISO Manufacturing PMI for March. The measure of South Africa’s manufacturing sector is believed to have risen above the 50 mark separating growth from contraction, advancing from February’s 47.6 figure to 53.7 in March. This would be another Rand-positive result. Also scheduled for release on Wednesday are South Africa’s Total New Vehicle Sales and Consumer Confidence reports. It has been predicted that the sentiment gauge dropped from 0 in the fourth quarter of 2014 to -4.05 in the first quarter of 2015.

Of course, Rand volatility is also likely to occur in response to any progress in the Greek bailout negotiations and Friday’s US Non-Farm Payrolls report. As a stronger-than-expected employment increase in the US would support the case for a June rate increase from the Federal Reserve, a bullish payrolls print could push the Rand lower before the weekend.