Rand in limbo ahead of ECB decision‚ Moody’s credit rating move

The rand was flat in morning trade on Thursday as the euro tracked the slightly stronger against the dollar in anticipation that the European Central Bank (ECB) will adopt a more hawkish stance towards monetary stimulus.

Analysts said the rand was expected to remain range-bound on Thursday as markets await nonfarm payroll figures from the US on Friday as well as a possible downgrade of SA’s sovereign credit rating from Moody’s.

At 9.02am the rand was at R13.1389 to the dollar from R13.1219. It was at R14.7738 to the euro from R14.7415 and at R16.8938 to the pound from R16.9095.

The euro was at $1.1244 from $1.1234.

South African unemployment for the first quarter of 2017 was unlikely to move the market‚ but along with trade surplus data from Wednesday “may well be key pieces of the puzzle we are building to show Moody’s that a downgrade of our credit rating should be avoided“‚ TreasuryOne dealer Gerard van der Westhuizen said.

“Overall the rand is still in limbo on a relatively short-term basis‚” Standard Bank trader Warrick Butler said.

Statistics SA is expected to announce unemployment data for the first quarter of 2017 at 12.30pm.

Trading Economics forecasts a marginal increase in the unemployment rate to 26.7%‚ from 26.5% in the fourth quarter of 2016.

Moody’s is expected to pronounce on SA’s creditworthiness on either June 2 or June 9.

On Wednesday the South African Revenue Service announced a trade surplus of R5.08bn for April‚ worse than the expected R7.4bn.

Nedbank economists said on Wednesday trade volatility would likely continue through the course of 2017‚ but not significantly influence decisions made by the Reserve Bank monetary policy committee.

Currency volatility and domestic political factors‚ including the continued status of President Jacob Zuma‚ would have more influence.

“We anticipate that rates will be kept on hold until there is some sort of political resolution‚ possibly by year end‚” Nedbank said.

Asian markets were mixed on Thursday. Australia’s ASX was marginally firmer‚ while Japan’s Nikkei gained 1.07%.

 Dow Jones Newswires said better than expected capital expenditure during the first quarter lifted the market even as the yen remained flat to the dollar.

“Domestic corporate activities are becoming more active‚” said Daiwa Securities senior strategist Hideyuki Ishiguro.

The Shanghai composite was down 0.47% following the release of the Caixin Purchasing Managers’ Index for May‚ which dropped to 49.6 points from 50.3 in April. This was in contrast to the official figure‚ which placed the index at 51.2. At 9.02am Hong Kong’s Hang Seng had added 0.48%.

The newswire said European stock markets were expected to open flat in anticipation of the ECB decision next week.