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Rand to strengthen
Rand to strengthen
Is South Africa’s President Jacob Zuma about to be ousted? Markets think so, judging from the rapid appreciation of the ZAR, which is pricing in improved stability and decreased corruption. A smooth transition will press USDZAR down further.
The positive scenario is that Zuma will resign in the next few months, and Cyril Ramaphosa will succeed him without massive turbulence or the ruling African National Congress party breaking self-destructing factions. Despite the minor correction in high-beta emerging market currencies, we remain bullish on the Rand.
EU growth pushes Euro
A broad uptrend in European Union economies is clear: European industrial production ended 2017 up 3.2%, with strong contributions from Germany, Italy and Spain among others. Just in the past days, Italian retail sales in November came in higher than expected and German GDP clocked a 2.2% rise on the year.
What comes next is the European Central Bank’s normalisation of monetary policy. We think this is coming sooner rather than later. We also expect to see the EUR/USD appreciate above its current 1.20 range.