Sun. May 31st, 2020

Rand struggles as South Africa’s COVID-19 cases rise

(Partner Content) Last week Wednesday, the World Health Organization (WHO) declared the COVID-19 outbreak a pandemic. The announcement caused volatility among all markets, which led to risk-off sentiment and a drop in the Rand’s value.

rand struggles as south africas covid 19 cases rise 1024x683 - Rand struggles as South Africa’s COVID-19 cases rise

The rand report is brought to you by Sable International

The Rand showed some recovery after foreign countries introduced stimulus policies which led to an inflow of liquidity into emerging markets, but it struggled to show persistent gains as the COVID-19 pandemic has continued to impact the Rand. Cyril Ramaphosa has announced that the virus outbreak is now a national emergency.

The Bank of England’s (BOE) Monetary Policy Committee
voted to cut interest rates by 50 basis points from 0.75% to 0.25% in an
emergency attempt to boost the economy. It was expected that the European
Central Bank (ECB) would follow in the BOE’s footsteps, but surprisingly the
ECB left interest rates unchanged and rather resorted to other means of
stimulus.

Donald Trump has declared the outbreak a national emergency, opening the doors for $50 billion in emergency funds. The Federal Reserve has cut interest rates and has implemented a $700 billion stimulus programme. The foreign stimulus caused an inflow of liquidity into emerging markets, which allowed the Rand to recover to R16.04 to the Dollar on Friday. However, the Rand fell short of any persistent gains in strength. South Africa is a proxy for emerging markets which is why there is high volatility during these times of uncertainty.

4208f58a weekly rand report 17 march 2020 - Rand struggles as South Africa’s COVID-19 cases rise

During the emergency briefing on Sunday, Ramaphosa
announced that the outbreak is now a national emergency and schools would be
closed from Wednesday until the end of the Easter holidays. The decision was
made to close 35 ports of entry and a travel ban on the most infected countries
has been implemented. The Rand struggled throughout the day yesterday and
showed a lot of volatility, at one point hitting R16.70 to the Dollar.

South Africa’s inflation rate for February will be
released tomorrow. It is expected to drop from 4.5% to 4.4%. On Thursday, the
South African Reserve Bank will decide whether interest rates will be cut. It
is expected that rates will be cut by 25 basis points from 6.25% to 6.00%. The
decision could have an impact on Moody’s rating review scheduled for the 27 March.

Market event calendar

Tuesday 17 March

  • US retail sales (MoM) February: expected at 0.1%
  • Japan’s balance of trade February: expected at
    ¥915 billion

Wednesday 18
March

  • South Africa’s inflation
    rate (YoY) February: expected at 4.4%
  • South Africa’s inflation
    rate (MoM) February: expected at 0.2%
  • South Africa’s
    core inflation rate (YoY) February: expected at 0.2%
  • South Africa’s retail
    figure (YoY) January: expected at 1.1%
  • Eurozone’s balance
    of trade January: expected at €2.8 billion
  • Eurozone’s inflation
    rate (YoY) February: expected at 1.2%
  • Eurozone’s core
    inflation (YoY) February: expected at 1.2%
  • Japan’s inflation rate (YoY) February: expected
    at 0.5%

Thursday 12 March

  • Australia’s unemployment
    rate February: expected at 5.3%
  • US current account
    Q4: expected at $-112 billion
  • South Africa’s interest
    rate decision: expected at 6%

Friday 13 March

  • China’s loan prime
    rate 1Y: expected at 3.95%

Leave a Reply

Your email address will not be published. Required fields are marked *