The short term picture for the ZAR is murky. Bonds’ 186’s have recovered well from their worst levels around 9.45 (currently trading around 9.10)*. This despite some negative assessments from the major rating agencies over recent days. This has helped the rand recover some lost ground from its weakest levels around 14.15 (currently trading around 14.10)*. In my opinion this has more to do with market positioning after last week’s sell off than anything else. In the medium term, prospects for further downgrades and pain for the rand seem obvious, but the shorter term is less clear.

It seems that Trump’s campaign troubles are about to receive a healthy dose of investigative attention. The FBI is all over this and Trump will struggle to remain unaffected. Why should we care?

Well, in simple terms, it may spell trouble for the Republican economic agenda, tax reforms, and economic growth, thus stalling the recent bearish price action in the U.S. bond market. If so, it could mean that E.M. become in vogue again as yield seekers enter the fray once again. Thus the rand has staged an impressive recovery.

Today we have the latest set of domestic trade data – another substantial surplus may also add to bullish momentum. I am convinced that the medium to longer term trajectory for the ZAR cannot be positive, but it’s not a one way bet in the short term. Our ratings are almost sure to be downgraded (it’s not if, it’s when) and, as always, it’s going to be a question of timing.

The domestic picture is extremely bleak and will not improve soon. However there are many factors at play here. Best guess range for the day – 13.9500-14.1500*.