With the Trump saga coming to an end, the market appears to be delaying any major moves until President-elect Biden is sworn into power on Wednesday. The Biden administration has proposed a USD 1.9 Trillion stimulus plan. This has buoyed the USD, as the general consensus is that it will stimulate the economy to such a degree that the Fed could raise rates sooner than initially anticipated. Furthermore, Treasury nominee Janet Yellen – the previous Fed governor – is very market-oriented, which should be positive for the USD. This could be something to look out for in the medium-term as the dollar has been on a weakening streak over the past few months.
Locally, South Africa remains under strict lockdown protocols with daily infections still higher than the previous peak, although the numbers appear to be dwindling. Since the announcement of the month-long extended lockdown in South Africa, the ZAR has strengthened, largely off the back of improved global risk sentiment. However, it’s recommended to exercise caution, as the market can fluctuate dramatically on a single news headline.
On the economic front, the past week didn’t surprise much. The Chinese economy has rebounded significantly since the beginning of the Covid-19 pandemic, whereas most of the other countries have not. This could be positive for South Africa in the medium-term, as China is one of the country’s major trading partners.
On Monday, Martin Luther King Jr. Day was celebrated in the US, so the markets weren’t very active since liquidity was thin. In the coming week, numerous countries, including Canada, China, Japan, Europe and South Africa, will be releasing their interest rate decisions, which generally makes for quite a volatile time.
Market event calendar
Tuesday 19 January
- EUR: ECB Bank Lending Survey
Wednesday 20 January
- CN: Interest rate decision
- UK: CPI Data
- CA: Interest rate decision
Thursday 21 January
- JPN: Interest rate decision
- EUR: ECB Interest rate decision
- SA: Interest rate decision