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The Rand strengthened at the tail end of last week after Moody’s delayed their assessment of South Africa’s sovereign debt. They have not provided a reason for not sticking to their scheduled date. South Africa currently has a Baa3 rating with a stable outlook.
On Friday, it was expected that Moody’s would change the country’s outlook from stable to negative. If Moody’s were to downgrade South Africa to junk status, the country would lose its place in the Citigroup’s World Government Bond Index, which only contains bonds that are investment grade.
This means that overseas investment funds that are only allowed to invest in investment-grade bonds would have to sell their South African government bonds. This would result in a weakening of the South African economy and the Rand.
There isn’t much in terms of domestic
economic news this week. The foreign exchange reserves for March come out on
Thursday, but they shouldn’t cause much fluctuation in the Rand. The South
African Revenue Service (SARS) announced yesterday that it missed its budget
estimate by R14.6 billion.
According to SARS, these are preliminary
results, but there is still cause for concern. South Africa’s revenue
collection has been declining since 2015, weakening the Rand while doing so. Poor
administration and weak economic growth are the main causes of the problem.
- US Durable Goods Orders: Expected
to dip from 0.4% into the negatives. Could cause a short term drop in the value
of the US Dollar.
- Australia’s Imports, Exports, Retail
Sales and Trade Balance: A whole host of data coming out of Australia could swing
the AUD one way or the other.
- US Jobless Claims: A good
indicator of the amount of people relying on government funding due to
- ECB monetary policy meeting: The
European Central Bank will be publishing its account of the latest Monetary Policy
Meeting that was held on 6 and 7 March.
- US Nonfarm Payrolls: The NFP numbers are expected to
increaseto 175,000 which will strengthen the USD/ZAR rate.