USD/ZAR likely to remain volatile on persisting high political uncertainty, says Commerzbank

Yesterday afternoon the spokesperson of the South African parliament announced that today parliament would vote on the opposition’s motion of no confidence against President Zuma, for the first time in a secret ballot. As a result the rand appreciated notably against USD and was able to largely retrace the previous day’s losses.

The President already survived six previous votes of no confidence, but with the secret ballot today, the President’s future could be on a knife edge. To remove him from office the opposition needs 201 votes. At least 50 MPs of the governing ANC (African National Congress) have to vote against their own President. At 249 out of 400 seats the ANC holds the majority in parliament.

In view of increasing protests against the President’s and his followers’ misgovernment, the number of critics even within his own party is rising. Following the weak results during the regional elections in August 2016 the ANC is under pressure. Parliamentary elections are due in 2019. Yesterday’s market reaction suggests that the rand will appreciate at least short term should Zuma really be removed from office, as this would fuel hopes for an improvement of the political situation.

"As a consequence should the vote of no confidence fail that would be more likely to put pressure on the rand. One way or the other the political uncertainty is likely to remain high and thus volatility in USD/ZAR," Commerzbank commented in its latest research report.

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