Eskom load shedding

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Lights out for the Rand

(Partner content) The economy received a low blow with news of the implementation of Stage 6 load shedding.

Eskom load shedding

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The news couldn’t have come at a worse time, as investor sentiment is at an all-time low. The Rand is trading above R19 against the Pound and an impending downgrade of the economic outlook for South Africa is knocking at the door.

State-owned enterprises (SOEs) Eskom, South African Airways and Transnet continue to struggle. The only hope the economy has is the upcoming holiday season that sees on average of over R200 billion spent across the country. However, this is only a short-term moment of glee as the Rand could most likely stay around or above R19 throughout the holiday season. It is currently trading at R19.27 to the Pound, R14.65 to the Dollar and R16.21 to the Euro.

Some upcoming news that could have a dramatic effect on the Rand is the new China-US trade tariffs which are being implemented from 15December. Continued efforts and negotiations coupled with the Federal Reserve holding off on interest rate cuts could be negative for the South African economy due to the negative correlation the ZAR has to the USD.

In international news, the UK will be holding a general election on Thursday that will see either the Conservative or the Labour Party take the win. This could bring better direction to the Brexit debacle. A majority win for Boris Johnson would see the Pound rally to new highs, whereas a hung parliament would see the Pound come under pressure.

With major economic data being released this week, we could see a high level of implied volatility in the South African market which, in turn, can break the bonds of the current trending market between R18.80 and R19.30 to the Pound.

Market event calendar

Tuesday 10 December

  • South African manufacturing production: This has been decreasing month-on-month since June and is forecasted at -1.9%
  • UK manufacturing production: Forecast at -1.4%

Wednesday 11 December

  • South African inflation rate: Forecast to decrease by 0.1% to 3.6%
  • US interest rate decision: Bullish outlook of 1.75%
  • US Fed monetary policy report

Thursday 13 December

  • South African gold production: Forecast at -7%
  • South African mining production: Forecast at +0.3%
  • South African PPI
  • UK parliament election

Friday 14 December

South African balance of trade: Forecast at R2.8 billion