David Gracey

David Gracey

Head of Foreign Exchange and Fixed Income Trading

Currency Comment: Racing “ahead”

    What a magnificent sporting weekend it was, (if you discount the performance of the notsospringboks) culminating in a 1,2 victory for Mclaren, as the 2 championship protagonists seem intent on falling over each other for the rest of the season. Not only, like 2 drunk teenagers, do they keep driving into each other, they then seem very comfortable blaming each other. This makes a great spectacle for us the fans, but as a strategy for winning championships, it seems rather dimwitted.

    This led me to think about the currency markets (nice Segway Dave) where the ZAR has been very Mclaren like recently. Storming to the front whilst all the other currencies do their best to trip over each other.

    The thing is though, like Mclaren knows they would not be at the front were it not for the drunk teenagers allowing their testosterone to run riot over their intelligence, so we understand that the ZAR’s recent performance does not really have anything to do with team SA being the fastest and best team. In fact, if South Africa were  a modern Formula 1 team it would look something like this.

    - The engine would keep breaking down (loadshedding) just as soon as the driver put his foot down on the accelerator. Spectators would be asked to hold on for a couple of hours as the team worked frantically to rejoin the race, which by now had moved onto a new circuit.

    - The chassis (economic policy) would be modeled on a 1960’s Lada as a collectivism mindset prevailed in the team (officially

    - Unofficially though, the team would be so fractured that even a pit stop takes a few hours to complete.

    - The aerodynamics team (cabinet and municipal mayors) comprises designers who designed the Hindenburg.

    - Every now and again the team runs out of money. This is because tenders are put out for suppliers, and the awarding of those contracts has nothing to do with performance, but has some other complicated criteria, usually based on who can pay the biggest kick back. Sponsors (tax payers) are then “invited” to contribute just a little bit more.

    - The engineers in the team don’t really understand Formula1, but they are on the team because they joined the fan club when they were teenagers, and thus have been appointed for their loyalty.

    - The team leader is “shocked” as every race brings new challenges to the team. He can’t understand why the tires being used are from last season, and that the fuel being used has been drained from an old tractor. However, he remains confident that next season is going to be great, and that we will produce the best and fastest car ever seen. Every news conference he promises new measures to combat the poor performance. The previous team principle keeps popping up trying to derail any miniscule sign of improvement.

    Yet at every race the other teams who are theoretically faster, and better, keep driving into each other, thus administering enough lipstick on team SA to make us look like the prettiest and fastest car out there.

    But you just know that at some point the other drivers will come to their senses, in which case team SA’s challenge will be rendered obsolete, just like the chassis that its built upon.

    For now though we keep waving the checkered flag.

    All this said only slightly tongue in cheek.

    On a serious note, we continue to see very good export supply, and as long as foreign bond markets remain well supported by central bank doves we should see the ZAR hold its own.

    Technically 14.0700 is current support levels, with resistance appearing at around 14.2800- 14,3500

    Good luck.