Mixed hand dealt to the rand amid global data releases

The rand report is brought to you by Sable International

Last week saw the rand strengthen about 1.7% against the Greenback and 1.45% against the pound closing the week at R16.99 USD/ZAR and R21.25 GBP/ZAR. Last week’s strength in the rand is likely due to the increase in risk appetite on the back of the release of positive global economic data as well as some relatively positive local data.

The release of US payroll data on Thursday showed an increase of 4.8 million jobs in June which is 1.8 million more than expected. The risk-on sentiment was not long lived as a second wave of infections spread through several states which has caused risk sentiment to drop. 

In terms of local data, the South African GDP data for the first quarter beat expectations last week Tuesday, but still resulted in negative growth of 2%. The reason the rand strengthened after this data was released is because the expectation of negative growth of 3.5% was already priced into the rand. The negative growth is not a surprise given the current circumstances and increasing COVID-19 infections. The current account data comes as more of a surprise with the first current account surplus recorded since the first quarter of 2013. The rise in prices and volumes of particular exports and the decrease in the volume of imports amid the pandemic has caused the current account surplus of R69.7 billion which was published on Thursday. The rand stood steady through Monday, but has weakened as of this morning 08:00 GMT+2 and is currently trading at R17.06 to the dollar and R21.32 to the pound.

The South African consumer confidence for quarter two is set to be released at 12:00 GMT+2 today and is expected to drop to -15. This would be the lowest recorded since 2015.

With quite a mixed hand dealt to the struggling currency, we are bound to see a tug of war between growing infection rates chasing investors away and increased risk appetite resulting from upbeat economic data.

Market event calendar

Tuesday 7 July

• South Africa Consumer Confidence Q2: Expected at -15
• Canada Ivey PME June: Expected at 43

Wednesday 20 May

• Great Britain Supplementary Budget
• Japan Current Account May: Expected at ¥1000 billion

Thursday 21 May

• China Inflation Rate (YoY) June: Expected at 2.5%
• Germany Balance of Trade May: Expected at €21.1 billion

Friday 22 May 

• China Unemployment Rate JUN: Expected at 12%
• USA PPI (MoM) JUN: Expected at 0.3%