Sun. May 31st, 2020

Devastation for the Rand amid worldwide coronavirus fears and recession

(Partner Content) The Rand continued to weaken last week after the fourth quarter of last year’s GDP growth rate was released, and took another knock after the confirmation of coronavirus cases in South Africa.

devastation for the rand amid worldwide coronavirus fears and recession 1024x683 - Devastation for the Rand amid worldwide coronavirus fears and recession

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The Rand weakened further during the early hours of yesterday morning but started to recover after almost reaching R17 to the Dollar. It continues to remain volatile.

The Rand and the coronavirus

The South African economy has slipped into
a recession for the second time in two years. This was confirmed when the GDP
growth rate for the fourth quarter of 2019 came in at -1.4%, which was worse
than the expected -0.4%. The second term of negative growth combined with the
new cases of coronavirus have severely impacted the Rand. Moody’s rating is due
later this month, and it’s looking less likely that South Africa will be kept
at investment grade.

Given the impact of the coronavirus, Moody’s has decreased the growth forecast for G20 countries for the first half of 2020 and anticipates that the virus will hurt economic growth in many countries. The Rand is one of the riskier assets within the G20 countries making it the first currency to be sold off by investors. Moody’s forecasts South Africa’s growth to be 0.4%, 0.3 percentage points lower than previously expected.

f0176575 weekly rand report 10 march 2020 - Devastation for the Rand amid worldwide coronavirus fears and recession

On Monday morning, the JSE dropped 6%
within minutes of markets opening. This is not just from the effects of the
coronavirus outbreak but also due to the conflict between Russia and Saudi
Arabia over the oil price.

Stage 2 load shedding has started again
today and it’s likely to continue until Thursday, potentially spelling more
trouble for the struggling Rand.

Market
event calendar

Tuesday 10 March

  • European area GDP growth rate (YoY) 3rd
    estimate for Q4: expected at 0.9%
  • European area GDP growth rate (QoQ) 3rd
    estimate for Q4: expected at 0.1%

Wednesday 11 March

  • Australian Westpac consumer confidence change for
    March: expected at -0.8%
  • Australian Westpac consumer confidence index: expected
    at 94.7
  • UK balance of trade for January: expected at £-3.7
    billion
  • UK Spring Budget 2020
  • US core inflation rate (YoY) for February:
    expected to stay at 2.3%
  • US inflation rate (YoY) for February: expected
    at 2.3%

Thursday 12 March

  • South African manufacturing production (YoY) for
    January: expected at -2.8%
  • South African manufacturing production (MoM) for
    January: expected at 1.7%

Friday 13 March

  • South African business confidence Q1: expected
    at 20

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