Rand Report: Rand reversal after recent weakness

Last week was relatively uneventful in the forex markets, following a tumultuous tumble for the South African rand. Nevertheless, the emerging market ZAR was able to recover a portion of its previous losses.

There was minimal local data last week; however, there was optimistic GDP growth data from South Africa. The South African GDP growth rate came in at 1.6% in Q3, exceeding the anticipated reading of 0.6%. This comes after the 0.7% contraction in GDP during Q2.

South Africa is still plagued by loadshedding woes, with Stage 6 power cuts being implemented over the past week. This has undoubtedly added weight to the local economy and will continue to hinder prospects of future growth.

It appears that the trend reversal, following the Ramaphosa “Farmgate” scandal, has been the most significant ZAR driving force. After a hefty loss in the previous week, the rand was able to regain some ground courtesy of subsiding political uncertainty.

The GBP/ZAR pair declined by 1.30% during last week’s trade, from an open of R21.49. After reaching a low of R20.81, the pair closed at R21.24 on Friday.

The USD/ZAR pair made a similar move to the downside, depreciating by 1.04%. After opening at R17.48 and bottoming out at R17.05, the pair ended the week at R17.33.

The EUR/ZAR experienced similar price action, falling by 1.12%. After opening at R18.42 and reaching a low of R17.94, the pair finished the week at R18.25.

The USD had a slow start to the week

Last week, there was minimal significant global data. The USD had a slow start to the week, with the market remaining in limbo. Nevertheless, the greenback managed to make some marginal gains, with the Dollar Index (DXY) appreciating by 0.25%. Additionally, the GBP/USD moved 0.26% lower, ending the week around the 1.22 level.

This week, there will be serious data released, including a whole host of November inflation prints. The US inflation rate is predicted to come in at 7.3%, down from 7.7% in October. Inflation in the UK is expected at 10.9%, after the previous reading of 11.1%. In the Eurozone, the inflation rate is likely to decline from 10.6% to 10.0%. Lastly, South African inflation is expected at 7.5%, slightly lower than the 7.6% figure recorded in the prior month.

we have three crucial interest rate decisions this week

Furthermore, we have three crucial interest rate decisions this week. The US, the UK, and the Eurozone are all expected to raise rates by 50 basis points as part of a coordinated effort to curb inflation. Any deviation from these projections will likely result in extreme market movement.

The final noteworthy data event will be the retail sales growth. This data will provide insight into the economic activity in the global market.

This upcoming week will provide markets with a fresh view of global economic progression, by highlighting levels of economic activity, providing an update on the persistence of price pressure, as well as supply insight into forward-looking monetary policy.

Upcoming market events

Tuesday 13 December

USD: Inflation rate (November)

GBP: Claimant count change (November)

AUD: Westpac consumer confidence index (December)

AUD: NAB business confidence index (November)

Wednesday 14 December

USD: Fed interest rate decision

GBP: Inflation rate (November)

ZAR: Inflation rate (November)

ZAR: Retail sales (October)

Thursday 15 December

GBP: BoE interest rate decision

EUR: ECB interest rate decision

USD: Retail sales (November)

AUD: Unemployment rate (November)

Friday 16 December

EUR: Inflation rate (November)

GBP: Retail sales (November)

GBP: GfK consumer confidence (December)

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