Tue. Nov 19th, 2019

This week: All eyes on Mboweni’s Budget Statement

Moody’s credit rating, the South African unemployment rate and the Fed meeting all in the spotlight this week.

this week all eyes on mbowenis budget statement 1024x683 - This week: All eyes on Mboweni’s Budget Statement

This Rand report is brought to you by Sable International

The Rand has shown some strength in the last couple of weeks. On Friday, it reached a month-and-a-half high of R14.57 to the US Dollar. The data coming out this week is likely to dampen the mood as we expect the unemployment rate to increase from a staggeringly high 29% to 29.4% when it’s released on Tuesday.

On Wednesday, the South African Finance Minister Tito Mboweni will be delivering the country’s Medium-term Budget Policy Statement. The budget will show the national accounts of South Africa and it isn’t looking optimistic for the country.

1462a188 2019 10 29 the rand report - This week: All eyes on Mboweni’s Budget Statement

Two major points of concern that Mboweni will be touching on
include the tax shortfall after South Africa’s expected tax receipt came in R60
billion short of forecasts and the upcoming Moody’s assessment after the credit
rating agency gave South Africa the benefit of the doubt for the last couple of
years.

The financial bailout of R59 billion to Eskom continues to
cripple the nation and its already poor budget. Should the budget come in worse
than expected, it should weaken the Rand and increase the likelihood of a
downgrade to junk status from Moody’s, which would be a disaster for the Rand.

In the US, the Federal Reserve will be meeting on Wednesday
to hold its policy meeting. With the Rand negatively correlated to the US
Dollar, we can expect to see some strength should the US Dollar weaken
following the rate decision. The markets largely expect the Fed to cut interest
rates by 25 basis points, leaving US interest rates at 1.75%.

Market event calendar

Tuesday 29 October

  • South African unemployment rate

Wednesday 30 October

  • Fed interest rate decision
  • Australia’s inflation rate

Thursday 31October

  • EU GDP growth rate
  • China manufacturing PMI

Friday 1 November

  • US non-farm payroll
  • US ISM manufacturing PMI

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