Your USDZAR weekly forecast. There is never a quiet news week when it gets near the end of the year, and this last week was no exception!
As US elections and stimulus took center stage, the ‘wires’ hummed with ever-changing updates coming across the pond.
The election and surrounding debates are beginning to really hot up, and the global economy is watching very closely to see what happens.
The Rand however, stayed fairly calm on the whole… although losing some of it’s gained ground from the week before.
There is a whole lot to dig into – so let’s get into the full review.
Key Moments (5-9 October 2020)
To begin with, here were the biggest talking points from the 5 days:
- SARB Policy – it looks as if we are now seeing a similar attitude from SARB as the Fed, as the central banks try to manage the pandemic crisis…
- US Stimulus Talks – they were looking promising, then broke down, then got restarted…sort of. Where do we stand now?
- US Election – Trump’s health, election fraud worries, whether the next debate will go ahead and much more…what a week!
It was a week of global focus, that was for sure, and right from the get-go, it was all about Trump’s health.
The president having been hospitalised last week had briefly upended all plans of the election, but now on Monday, Trump was looking to reset things back to normal.
And in true larger-than-life fashion, Trump emerged from hospital on Monday just a few days after being diagnosed, and was back in action in the White House on Tuesday morning…
…and to the action he certainly returned, putting a lid on the negotiations around stimulus, saying that the Democrats were “not negotiating in good faith”, and that stimulus plans must be put off until after the election.
This sent the markets, particularly stock markets, into rather a tailspin!
But this quickly changed a few hours later as the President’s intentions came a little clearer:
He announced he would sign the following standalone bills, if Congress could just get them to his desk:
- A bailout for airlines to stop job losses
- More funding for the paycheck protection program to save more jobs
- Another round of $1200 stimulus cheques
This showed things a little clearer, that the President was trying to avoid bailing out Democrat cities and states, and not allowing crazy ideas such as no one being allowed to evict anyone from rental properties for 12 months, whether they pay or not – which was what Pelosi and others were pushing for.
But the uncertainty remains aplenty, as America and the world looks to see what the next step will be, with just 3 weeks to election day…
As for the Rand, we saw it weaker, touching R16.73 to the Dollar, as the USD pulled back some strength following Trump’s recovery.
And then in other news…
- Across the pond, Brexit negotiations were extended for another month setting up the perfect storm, clashing with the US elections in November. Over the past week our screens have been graced by numerous headlines pertaining to the ongoing Brexit rollercoaster. First it seemed there was no deal anymore, then a few days later we saw progress with Boris set to meet the EU negotiator. The emotional back and forth with these Brexit negotiations have put the markets on edge, with big swings seen with all currencies associated with the GBP.
- SARB’s monetary policy has been a big point of discussion in the last few months as they were faced with the problems the same as every central bank which is grappling with their own economic crisis. And it now seems the Reserve Bank will be taking a similar approach to the US Fed, with a ‘wait and see’ approach. The expectation is for interest rates to stay low for the foreseeable future, as SARB has very little wiggle room to try stimulate the economy further.
- One piece of positive news was the report on South Africa’s miners, that they have been almost unscathed by the pandemic. The industry has weathered the storm better than most of the economy, despite the 44% decrease in production during the hard lockdown of April.
- No surprises as SAA is in the news for all the wrong reasons once again, and this time it looks like action is coming. Tito Mboweni is prepping for his mid-term October budget speech coming next week, and he warns that it isn’t going to be popular – and that SAA is going to be dealt with. This is going to be a major one for locals and investors alike to watch, to see if the black hole for cash is finally going to be put out of action once and for all.
Just like that, all of a sudden it was Friday… and what a Friday it was for the Rand, as it recovered some ground to break below R16.50/$ again:
This was as the Dollar endured a torrid time amid the US uncertainty. The USD was back over $1.18 to the Euro, and the Dollar index testing 93.
So at the South African close, we saw the local unit testing R16.40, before reversing to end the week off around R16.47…
And then late on Friday, reports came out that President Trump had raised the Republicans stimulus offering to $1.8 trillion…
And that was the end to an eventful week…
The Week Ahead (12-16 October 2020)
As we look to the week ahead, we have very few fundamental events as triggers, the main ones being:
- SA – Retail Sales
- USA – Jobless Claims, Presidential Debate, Retail Sales
- UK & EU – BoE Governor’s speech
But don’t let that fool you into thinking that there is nothing happening to trigger market activity…
We are in for another rollercoaster week, as US politics takes centerstage, along with stimulus talks, Trump’s health, whether the next debate will go ahead… and not to mention the rumours of the Democrats attempting to remove Trump from office based on him being “in an altered state” from his treatment.
So much uncertainty prevails – which means more volatility!
Where does this leave the Rand?
Well, we will keep looking at our Elliott Wave based forecasting system to give us some clues, with some initial Rand weakness likely – but there are some key levels that we will be watching to confirm the larger degree trends.
It is likely to be an interesting week once again.
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To your success~
James Paynter