Weekly Rand Report: Lights out for the Rand

One main highlight from this year’s SONA was the declaration of a “state of disaster” pertaining to Eskom, the crippled state-run electricity provider. To combat this, the ANC will appoint someone to take on the newly constructed Minister of Electricity position. Many media outlets are labelling this as a mere PR stunt, rather than a change of real substance.

The other notable points were linked to the usual issues that plague the country. These include rampant crime and corruption, widespread unemployment, and a rising cost of living. The markets did not take this year’s SONA address with much optimism, and the ZAR weakened drastically. Hopes of a prosperous economy shine dimmer than the candle lit households across the country.

Over in the United States, Fed officials noted that their strong labor market would provide additional breathing room for further rate hikes. These comments came after the previous weeks’ impressive payrolls report, which indicated that over 500,000 jobs were added to the economy in January. This data indicates that a recession is unlikely to materialize.

This kept the USD in positive territory. The Dollar Index (DXY) moved 0.70% higher, with the greenback gaining 1.10% against the Euro. However, the US Dollar ended the week relatively flat against the Pound, another currency that achieved a notable positive performance.

The recent strength in developed-market currencies, coupled with a tumble in the South African rand, led the ZAR to venture deep into the red. The USD/ZAR pair appreciated by 2.46% last week. After opening at R17.49 on Monday and hitting a weekly high of R17.96, the pair closed at R17.92. 

The GBP/ZAR pair experienced similar price action and moved 2.56% higher. After rising from an open of R21.04 and peaking at R21.71, the pair ended around R21.58 on Friday.

EUR/ZAR made a smaller move to the upside, climbing by 1.44%. This gain was still significant, and the pair ascended from R18.85 to R19.12 during weekly trade.

This week, we look to see whether ZAR weakness will persist. One critical factor to keep in mind is the looming “grey listing” threat for South Africa, which would undoubtedly shake confidence in the country’s financial system.

South African inflation figures will be released on Wednesday, where we expect month-on-month inflation to cool. This would be a welcome respite to South African consumers. Retail sales data will also be released this week. 

On the global front, the focus will be on the US inflation data for January. This will be released today, 14 February, and is expected to decline further. In the UK, the unemployment data will also be released today. Retail sales data for both the US and UK will also come due on Wednesday and Friday, respectively.

Upcoming market events

Tuesday 14 February

USD: Inflation rate (January)

GBP: Unemployment rate (December)

GBP: Claimant count change (January)

AUD: NAB business confidence (January)

AUD: Westpac consumer confidence index (February)

Wednesday 15 February

ZAR: Inflation rate (January)

ZAR: Retail sales (December)

GBP Inflation rate (January)

USD: Retail sales (January)

EUR: Balance of trade (December)

Thursday 16 February

USD: Producer price Index (January)

AUD: Unemployment rate (January)

Friday 17 February

GBP: Retail sales (January)

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