Rand retreats as coalition dynamics spook investors

The rand closed just over 1.8% weaker yesterday after a day of fairly volatile trade as projections that the ruling ANC party will not win a parliamentary majority and be forced into a coalition unsettled markets.

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Fears the ANC could join up with either the non-investor-friendly EFF party or the surprise package, the MK party, are weighing on the currency.

The rand is currently trading weaker at 18.81 against the dollar this morning, while it has fallen to 20.35 against the euro and 23.94 against the pound. The South African Reserve Bank's MPC kept its benchmark repo rate at 8.25% as expected yesterday, with the central bank still voicing ongoing concerns over inflation.

Dollar weakens before data

Weaker US economic data has softened the dollar, giving back most of Wednesday's gains. Revised Q1 GDP dropped 1.3% from 1.6%, and pending home sales fell 7.7%. Markets now await the Core PCE inflation number, anticipating some cooling but still far from the Fed's 2.0% target. Chinese manufacturing PMI disappointed, falling below 50.0, pressuring emerging markets and commodity markets.

Gold steady; oil and metals softer

After yesterday's bounce, gold remains flat at $2,344, while platinum and palladium declined. Weak Chinese PMI data has softened copper and Brent prices, reviving demand concerns. US/China trade war fears weigh base metals and oil prices.