After performing fairly poorly for much of the week, the Rand was able to put on a modest show of strength on Thursday as a broadly weaker US Dollar helped emerging-market and higher-risk currencies climb. While the Rand failed to derive much benefit from better-than-forecast domestic retail sales figures, the South African currency rallied in response to the disappointing US industrial production number. Industrial output in the world’s largest economy was shown to have decelerated by -0.6% in March – the worst result since 2012 and far lower than the anticipated -0.3% dip. As this week’s sub-par US Advance Retail Sales report was already weighing on the ‘Greenback’, the industrial production data successfully bolstered bets that the Federal Reserve will refrain from increasing interest rates until September of this year, three months later than originally speculated.
The Rand was able to advance to 12.0231 against the US Dollar, prompting this response from Barclays Research; ‘Further Rand depreciation could have been limited by the softer than consensus US Empire Manufacturing and Industrial Production prints, a rebound in domestic retail sales and an ECB meeting that lacked surprises.’ South Africa’s retail sales report showed growth of 1.9% on the month (rather than the 0.35% increase expected) and an annual sales increase of 4.2%, over double the 2.03% year-on-year sales gain anticipated. As forecast by economists, the European Central Bank left interest rates and quantitative easing unchanged.
Rand gains were a little limited due to persistent concerns relating to Eskom, the nation’s largest energy provider, and the news that Greece has had its credit rating cut by Standard & Poor’s. The Rand remains trending in a softer position against the Pound. If today’s US initial jobless/continuing claims figures impress, the Rand could edge lower over the course of trading. Next week the South African reports to be aware of include the nation’s Consumer Confidence index for the first quarter and inflation data for March. Of the two sets of ecostats, the CPI numbers are likely to prompt the most notable Rand exchange rate movement.