Wed. Oct 28th, 2020

Rand Report: Is this the light at the end of the tunnel?

(Partner Content) Recent weeks have seen the ZAR strengthen back to 21 to the pound as the rollercoaster ride continues.

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The rand report is brought to you by Sable International

Emerging market strength coupled with overall weakness in the USD and GBP has created a climate of potential support around 20.89 to the pound and 16.11 to the dollar. This past week also saw the SARB keeping interest rates at 3.5% in South Africa, a record low, after cutting 300 bps so far this year. 

However, Monday saw the rand weaken against all major currency pairs. The ZAR is currently trading at 21.62 against the pound, 16.91 against the dollar and 19.86 against the euro.

The pound has continued to weaken over the past few weeks, as the UK struggles with its COVID relief systems. The health minister has announced that a second national lockdown could be on the horizon as hospitality venues across England will have to close by 10PM from Thursday. This has the potential to put further strain on the economy as it attempts to recover to normality.

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Image credit: Sable International

Back on home soil, the economy has slowly started to recover, as stimulus measures begin to have their desired effect. With the country currently at lockdown level 1, further strength is expected in the medium term, however, the crisis did create a lot of strain on consumers and many have spent their savings in order to maintain their living expenses. This creates abnormal fiscal risk and can cause the economy’s growth to be slower than usual in the coming year. This has the potential to see a further easing of the repo rate by the SARB in their meeting in November.

The USA has seen a volatile month with everything from riots, US-China tensions and COVID. This can be seen as contributing factors to the drop in the US stock market and sell off in the tech industry, over the last two weeks. In the coming two days, Jerome Powell will address Congress to lay out another plan to deal with the current crisis.

Market event calendar

Tuesday 22 September

  • US: FED speech
  • UK: BOE Speech

Wednesday 23 September

  • US: Speech continues
  • UK: Market service PMI Data

Thursday 24 September

  • Europe Area: Emergency special summit

Friday 25 September

  • No major events

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