Just when anyone would think it is looking like one way traffic for the Rand, it pulls a surprise back out of the blue!
After seeing the market shed almost 100c in a week, we saw it claw back almost all of that, riding back down toward R16.40.
It was once again global events taking centre stage, as the presidential race in the US started its final lap… with a chaotic debate grabbing many headlines.
And then there was a host of local news too!
So let’s get into the full review, as we try to cover the key moments from the 5 days.
Key Moments (28 Sep – 2 Oct 2020)
Here were some of the biggest headline grabbers from the week:
- SAA – the bankrupt airline is now suspended with immediate effect, as funding is awaited…
- Presidential debate – a chaotic Trump-Biden debate captured headlines, as voters and investors alike were dismayed at the level of animosity and lack of civility between the candidates…
- SA unemployment – strange, unexplained figures showed a massive improvement in the jobless rate…what was Stats SA doing?
- Stimulus talks – a final push from both sides meant the US stimulus was not yet off the table, but running out of time…
And the Rand began the week very much on the back foot, starting over R17/$ following a previous 5 days… and most were expecting more of the same.
The Rand though, had other ideas.
Over the next few days, the tide well and truly turned, as the market reversed back to test R16.40 to the Dollar by the time Friday rolled around.
But maybe that is jumping the gun as to what all happened in the week, with what all had happened in between then and Thursday.
Such as SAA…
The airline is now grounded (apart from a few previous commitments with cargo flights), as the government looks for where it can fund the massive hole in the finances.
Based on the way the Treasury responded to this idea of bailing SAA out last week, it may be best if it just stayed grounded – instead of burning more cash!
And then there was the Presidential Debate over in the US, which was fairly chaotic with insults flying between Trump and Biden.
In the end, there appeared to be no clear winner of the debate, even if the choice between the two candidates already couldn’t be any more stark.
A very interesting chart released by Elliott Wave International showed an amazing correlation between the stock markets and presidential elections:
Their video explains the detail of this, but in short:
- If the DOW is over 28052 points – 87% chance of Trump being elected.
- If the DOW is under 28052 but above 23377 – 55% chance of Trump being elected.
- If the DOW is under 23377 but above 22208 – 55% chance of Biden being elected.
- If the DOW is under 22208 – a strong chance of Biden being elected.
All of these chances are based on the where the market is on election day… sure makes for an interesting read!
And then in other news:
- Locally, unemployment figures came out with some really surprising numbers… Unemployment had improved from more than 30% down to 23.3%! How could this be in the midst of the pandemic? Well, as Moneyweb reported, the number of unemployed persons was actually at a record level – but a change in the way the counting was done as to who was actually looking for work. A closer look at the figures reveals that Stats SA apparently classified people who could not work during the pandemic as not economically active due to “other” reasons. The reality is that the situation is dire, but it is almost like Stats SA has tried to do a patch up job…rather strange!
- In other local economic news, SA trade figures released yesterday for August 2020 showed a surplus of R38.9 billion, slightly up from the revised R37.2 billion in July.
- US Stimulus talks again grabbed headlines, with the White House and the Democrats trying to work together to make a deal, but coming up short, over and over again. The Democrats had their own $2.2 trillion bill, while the Republicans stepped theirs up to over $1.5 trillion, with some middle ground still needing to be found. This is going to be a big factor as we approach the final weeks of the election, as both sides know the need of the stimulus, for both Americans and their election chances.
- Non-Farm Payrolls came in at an encouraging 661k, but this was still well short of the anticipated 800k. So even with the unemployment rate dropping down to 7.9%, there was much concern that the economic recovery may be hitting a wall…
- And in the UK, the GDP figures for Q2 came out, showing a sharp retraction collapse of 20%!
And so, getting back to the Rand… what a week!
The market kept trending down to test R16.40 to the Dollar by late on Friday…
…this was following the news that Trump and his wife Melania had both tested positive for the virus – how will this affect the election in the coming weeks?
The Week Ahead (5-9 Oct 2020)
After a very busy week, this next one is looking a little quieter on the event front, with nothing of note locally, and only a few international events:
- USA – Trade Balance, FOMC Minutes, Jobless claims
- UK & EU – Retail sales & Unemployment Rate
Once again, the focus will be on the international stage as we watch to see what happens with stimulus, Trump’s illness, and the election – with all these being major Dollar triggers.
And for now, the Rand is riding the news very well!
Based on our charts, we are watching some key levels this next week, which will give some clues for market movement in the coming weeks…
Bottomline: this volatility is not going to go away! So you will need to keep focused!
Please take our Rand forecasting service for a test-drive!
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To your success~ James Paynter