Sun. May 31st, 2020

Negative speeches at the State of the Nation Address impact the Rand

(Partner content) This past week saw the State of the Nation Address (SONA) affect the markets.

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The Rand report is brought to you by Sable International

Some heated words were shared in parliament and president Cyril Ramaphosa addressed the country on political, economic and social aspects that are weighing down on the country’s ability to move out of its current economic challenges.

One of the main takeaways from last week was the increased activism in renewable energy and a larger emphasis on corruption within state-owned enterprises (SOEs). The small strength in the Rand that was shown post the State of the Nation Address was not long-lived as other external forces (such as the coronavirus) put a damper on emerging markets. 

In the UK, there was a reshuffle of Boris Johnson’s parliament. His finance minister, Sajid Javid, was removed from power and replaced by ex-Goldman banker Rishi Sunak. The Pound has gained on this news, as the market priced in some “Trump-style” stimulus – expecting massive spending by the Johnson government. 

The State of the Nation’s impact on the Rand

The start of this week saw the Rand weaken to a point where it is currently trading at R19.53 to the Pound, as opposed to R19.37 post-SONA. The US Dollar has shown immaculate strength in the recent weeks, taking the Rand to R15.01 to the Dollar. This Dollar strength is mainly due to global stocks edging higher on Monday. Chinese authorities launched new stimulus measures to steady the economy and curtail the impact of the coronavirus by lowering repo rates and injecting liquidity into the market.

South Africa’s annual inflation figures (YOY) for January will be released on Wednesday. Consensus is that an increase of 0.4% is more in line with the South African Reserve Bank’s range. The Rand could also receive a slight uptick due to the producer price index statistics.

On Wednesday, the UK will release some long-awaited data as the consumer price index (YOY) for January is set to increase from 1.3% to 1.6%; this will be the largest deviation in recent months.

dd0141c7 weekly rand report graph 18 feb 2020 - Negative speeches at the State of the Nation Address impact the Rand

Market event calendar

Tuesday 18 February

  • UK unemployment rate: Expected to stay constant
  • South African inflation rate (YOY) January: Expected to increase to 4.4%

Wednesday 19 February

  • UK CPI (YOY) January: Expected to increase to 1.6%
  • US Federal Reserve speech: Formation of new federal policies

Thursday 20 February

  • South African producer price index YOY: Forecasted to decrease by 1%

Friday 21 February

  • South African balance of trade: Negative impact on the Rand as balance widens from positive to negative

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