ZAR Forex Report
The latest GDP figures released last week were shocking – the SA economy shrunk by 1.2% and while we are technically not yet in a recession, the writing is pretty much on the wall.
The Rand has been seesawing up and down as the market still digests the ratings surprise and negative growth number, but it has been global risk and a struggling Dollar that has given the ZAR direction…
Markets move on sentiment; how investors expect a stock or currency to perform.
This was evident towards the end of last week as emerging markets fell and currencies weakened as investors speculated that the gains following the poor US data were overdone.
The poor US data led investors to believe that the Fed will not raise interest rates anytime soon.
The Rand lost the most among emerging markets, weakening as much as 2% on Friday as investors sold higher risk assets.
After closing below 15 to the USD Monday through to Thursday, the ZAR weakened through the psychological 15 mark to close above 15 on Friday.
On Monday morning the market opened significantly weaker @ 15.20 versus the USD and 17.13 and 21.63 versus EUR and GBP respectively.
The latest GDP figures released last week were shocking – the SA economy shrunk by 1.2% and while we are technically not yet in a recession, the writing is pretty much on the wall.
This figure was much larger than expected and the only positive is that we will probably not see many more rate hikes this year.
Unless we see drastic change, given the latest disappointing GDP figures, we could very well expect S&P to downgrade SA to junk status in December which will lead to Rand weakness as the market starts pricing this in.
While the Rand is very much following the global trend and continues to look forward to the US Fed rate decision and comments, as well as mounting Brexit fears, it is local data that grabs our attention today. In the SARB’s Quarter Bulletin, SA’s latest current account and balance of payment figures will be released.
A deficit is expected which means that SA imports more than it exports.
The Rand remained volatile yesterday and this morning, weakening from 15.15 to 15.30 on Monday, before strengthening again in late Monday trade and early on Tuesday.
Other data to look out for this week includes UK inflation and US retail sales data out today as well as the big one, US Federal Reserve rate decision tomorrow.
And finally, good news for SA wine producers and wine lovers in Europe: the EU agreed that SA can export 110mln litres of duty free wine, this is up from the current figure of 48 million litres.
Make it rain wine!
Have a great week.
ZAR FOREX RATES
USDZAR = 15.3617
GBPZAR = 21.7215
EURZAR = 17.2736
AUDZAR = 11.2867
NZDZAR = 10.7853
CADZAR = 11.9626
CHFZAR = 15.9126
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