Tue. Nov 19th, 2019

Mid-year budget forces Rand to tumble

Relief from US Dollar weakness and a Moody’s lifeline keep the ZAR afloat.

mid year budget forces rand to tumble 1024x683 - Mid-year budget forces Rand to tumble

This Rand report is brought to you by Sable International

A horrific mid-year budget from South African Finance
Minister Tito Mboweni caused the Rand to nosedive against all major currencies
last week. With South Africa’s deficit rising astronomically during the year,
we now expect to see a massive rise in national debt in the years to come.

Mboweni cut South African growth forecasts just days before the critical Moody’s credit review on Friday. Fortunately for South Africa, Moody’s (who have given the country the benefit of the doubt on numerous occasions) avoided a downgrade to junk status. The credit rating agency altered their outlook of the country’s credit from stable to negative. This means that any form of downgrade in the future will send the country into junk status and force offshore investors to take their money out of the country.

1a9a868d 2019 11 05 the rand report - Mid-year budget forces Rand to tumble

The Rand recovered quicker than expected following what was a
dreadful week for the ZAR. The Rand regained some strength on the back of some
Dollar weakness, after the US’s manufacturing numbers were weaker than expected.
While Moody’s changed their outlook, they allowed South Africa to retain the
all-important Baa3 status which allowed the Rand to find some relief.

With just the one data report out of South Africa this week,
the Rand is likely to be driven by the fluctuations of the US Dollar, global
risk trends and the South African PMI data (due out on Tuesday). Expectations
are that the index slipped from 49.2 in September to 49.0 in October.

Market
event calendar

Tuesday 5 November

  • US balance of trade
  • US ISM non-manufacturing PMI

Wednesday 6 November

  • EU retail sales
  • EU PMI data

Thursday 7 November

  • Australia’s balance of trade
  • UK interest rate decision

Friday 8 November

  • Australia’s monetary policy statement
  • China’s balance of trade
  • Germany’s balance of trade

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