The rapid formation of a coalition government in South Africa following the May elections has significantly boosted investor confidence, leading to gains in both the rand and South African equities. This view was expressed by Finance Minister Enoch Godongwana on the sideline of the New Development Bank’s general meeting, and is supported by financial flows data of recent months. “The markets were looking for stability and the formation of the government of national unity in a very short period gave that stability,” Godongwana said. South Africa’s relative attractiveness when compared to other emerging markets thus means that the ZAR is poised for further gains through the coming quarters as global financing conditions loosen and a search for yield is reignited in the markets.
With this in mind, the market is primarily concerned with economic data out of the world’s major economies, in particular the US, as this will determine when and how quickly the likes of the US Federal Reserve will be able to cut rates in the coming months. Accordingly, this week’s local data card, which kicks off today with the Absa manufacturing PMI and Naamsa vehicle sales data, and includes Q2 GDP data tomorrow, may hold limited market-moving potential in the immediate short term, with US labour market prints in the spotlight instead.