Ethiopian tinderbox, soft South African recovery

Frictions between Ethiopia’s federal government and the Tigray region turned into military confrontation this week, which will inflict damage not only on the population but also on the economy. In South Africa, the latest data add to the evidence that the recovery is struggling to gather momentum, reinforcing our view that interest rates will stay at their current levels for some time and that the government will water down austerity plans. At least, the South African rand performed strongly this week on the back of improved risk appetite following the US elections.