Good week for the South African Rand

Strong second

Another good week for the South African Rand took it into first place among the most actively-traded currencies. The helping hand came this time from a story that Deputy President Cyril Ramaphosa was well-placed to succeed Jacob Zuma as leader of the African National Congress.

Sterling bagged the second slot, strengthening by an average of 1.3%. It took a cent and a half each off the US dollar and the euro. The pound’s biggest gains were against the Northern Scandinavian crowns. Its smallest was the half cent it took from the Canadian dollar.

Breakthrough in Congress

Donald Trump’s tax-cut legislation, which so excited investors following his inauguration, moved a step closer to reality when the US Senate passed a bill similar to the one approved by the House of Representatives a fortnight earlier. In the last few months hope had faded that the Senate would take the step: several Republican senators had expressed their objections for a number of reasons. Nevertheless, the bill went through with a narrow majority late on Friday night.

The House version and the Senate version are not identical. More work therefore needs to be done on Capitol Hill to ensure that both chambers can sign up to the finalised act. Investors are cautiously optimistic that it will happen, if only because it will be the ruling Republican party’s last chance to pass significant legislation this year. The Senate vote was more positive for big US company shares that it was for the dollar but the currency could be expected to benefit if and when the act is passed into law.

Breakthrough in Brussels

After months of apparent lack of progress things started to look promising for Britain’s Brexit negotiations with Brussels. First, the government let it be known that it would be ready to pay an EU divorce bit of around €50bn. Shortly afterwards there was a rumour that a compromise had been reached on the future Irish border. Investors were allowed to believe that an agreement on the European Court of Justice would be forthcoming. A lunchtime meeting between Theresa May and European Commission President Jean-Claude Juncker was scheduled for Monday.

Sterling reacted positively. Investors would much rather see things moving ahead, even if they do not all agree that they are moving the best possible direction. In general, when progress is in the air the pound does well; when negotiations appear to stall it falls back.