After a strong degree of uncertainty stemming from the Brexit global markets stabilised towards the end of the week and most risk assets are bouncing back. Sentiment over Brexit still is the key driver but attention is turning back towards the data. Expectations around US Fed hikes seems to have completely u-turned with some even pricing in the potential for rate cuts. The market expects the Fed to maintain rates on hold for the rest of this year which bodes well for African market currencies. The prospect of stimulus measures in Asia and further in Europe is helping ease concerns about Brexit and triggering a global search for yield.

There is something new under the sun… The UK vote to leave the European Union which, despite being a potential consequence of the referendum just as much as the Bremain, literally spread chaos through global markets on Friday. Slowing demand from China, flat commodity prices and now a Brexit, what’s in it for African markets?

African markets received a welcomed boost in the middle of the week after a cautious Fed policy statement saw investors deferring their expectations regarding the timing of the next hike in US interest rates. The prospect of low borrowing costs in the US boosted the appeal of higher-yielding assets in developing nations however, the sky was somewhat clouded by uncertainty over the UK’s Brexit which has significant echo potential depending on the market.

African markets were mostly down this week although for various type of reasons. ZSE Ind. is the worst performer of the week and decreased by 7.47%. The cash shortage has intensified in recent weeks in Zimbabwe so much that a parallel black market has developed. In 2009, Zimbabwe abolished its own currency and replaced it with a multi-currency system after its economy collapsed. In addition to the dollar, the Zimbabwe allows the use of the South African rand, the yuan, the pound and the euro. The dollar currently accounts for about 95 percent of trade. Although that system restrained inflation for a while it also left the government short of cash. There is a situation where people pay a premium for hard cash today. The country’s central bank announced last month it would launch legal tender called “bond notes” pegged to the US dollar. Critics say this plan will worsen the black market as because Zimbabwe is a net importer and bond notes cannot be used to settle invoices abroad and bank cash shortage, importers will be forced to look for the dollar on the black market. This effectively means trading the dollar against itself.