The rand boards the rollercoaster of volatility amid another credit rating downgrade

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The South African rand has always been one of the more volatile currencies but after being officially ejected from the FTSE World Government Bond Index and being dealt a full deck of junk ratings following Moody’s and Fitch’s cut in March, the ZAR has been in a world of its own. To compound matters, S&P have slashed SA’s credit rating another notch into junk (BB-) as they expect the pandemic to negatively impact an already struggling South African economy.

Despite being kicked out of the FTSE World Government Bond Index, the South African rand rallied on Monday gaining at least 1% against the USD, EUR and GBP. This comes after President Cyril Ramaphosa initiated stage four of the lockdown and the South African economy slowly reopens, allowing some breathing space for the ZAR.

There is not much in terms of local data for South Africa, so the rand will be taking cues from anti-Dollar movements and how the eased lockdown is impacting coronavirus cases in the rainbow nation. The National Treasury has forecast a deep recession this year. Analysts have predicted the gross domestic product to contract by 6% as the economy remains in a lockdown. 

Market event calendar

Tuesday 5 May

• Australia RBA interest rate decision: Expected at 0.25%
• Canada balance of trade for March: Expected at CA $-1.5 billion
• US balance of trade for March: Expected at $-44.2 billion

Wednesday 6 May

• Australia retail sales (MoM) for March: Expected at 8.2%
• Eurozone retail sales (MoM): Expected at -8.8%
• South Africa SACCI business confidence for April: Expected at 89.2

Thursday 7 May

• Australia balance of trade for March: Expected at AU $2.6 billion
• UK BoE interest rate decision: Expected at 0.1%

Friday 8 May 

• UK Gfk consumer confidence flash for May: Expected at -42
• Germany balance of trade for March: Expected at €25B
• US non-farm payrolls for April: Expected at -20,980