ZAR: Rand Close to Fully Paring Budget-Inspired Losses
Broad greenback weakness has contributed to the pullback in USDZAR from Wednesday’s high, with the pair close to fully reversing yesterday’s budget-inspired losses, while the lack of any imminent threat to the GNU has allowed the local currency to recoup losses. Strength across the commodities space will also be contributing to the rand’s stronger showing, with ZAR-denominated gold prices showing at a new all-time high.
- Local reports indicate that the postponement was due to primarily to a disagreement on a potential 2pp hike to VAT, suggesting that all parties are generally committed to the fiscal consolidation plan (albeit some aspects of the budget will need to be re-negotiated).
- Sell-side analysts have largely taken the postponement of the Budget Speech in stride, playing down the potential for any imminent collapse of the GNU. See a summary of views here.
- Today’s reversal lower for USDZAR turns attention back to the Jan 24 low at 18.3022. Lows last Friday closely matched this level, bolstering it as a key short-term support. Meanwhile, a clear break of the 20- and 50-day EMAs – both of which were pierced yesterday – would instead expose key short-term resistance at 19.2296, the Jan 13 high.
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CANADA TO HAVE STRONG RESPONSE TO ANY US TARRIF: TRUDEAU
- CANADA TO HAVE STRONG RESPONSE TO ANY US TARRIF: TRUDEAU
CANADA: Trudeau-Canada Will Respond In Kind To US Tariffs
Speaking to reporters at a cabinet retreat in Quebec (live stream), outgoing PM Justin Trudeau says that the 'golden age of the United States' referred to by President Donald Trump in his inaugural address "will require Canadian resources". Says that his gov't "has already acted to address Trump's concerns on border security".
- After Trump said that 25% tariffs on Canada (and Mexico) could come on 1 Feb, Trudeau says that "Canada will respond in kind if tariffs are imposed". Says that Trump "is a skilled negotiator [who] will do what he can to keep negotiating partners a bit off balance."
- Trudeau: 'I support the principle of dollar for dollar matching tariffs."
- Trudeau: 'We know there will be uncertainty and rhetoric' from Trump admin. Says 'We will stay steady on defending the economic relationship between the US and Canada'.
- It remains to be seen whether the Trump administration will interact with the Trudeau gov't on a regular basis. Given that Trudeau is set to leave office in March, the Trump admin may be more inclined to seek negotiations with the incoming Liberal leader (whoever that might be) taking over as PM, or even wait until a general election that could come as soon as the spring.
