Rand Report: An interesting week ahead of an interest rate decision

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The GBP/ZAR fell to R20.76; the USD/ZAR turned around R16.50 and the EUR/ZAR has levelled out around R18.86.

This week has shown the GBP/ZAR moving up above the R21 price range in anticipation of the interest rate decision on Thursday by the South African Reserve Bank. The monetary Policy Committee is expected to cut rates again as the country is lining up for a projected 7% decrease in economic activity due to Covid-19. This rate cut will bring some relief to those who have taken on strain in the last three months. Statistics South Africa has published a survey showing that around 36% of South African businesses have laid off staff in the short term and 9% of the businesses surveyed have already ceased operations permanently.

The country is currently stuck between a rock and a hard place as the decreasing economic activity has been met with increased Covid-19 numbers and decreasing restrictions as restaurants and certain public areas start to open again. Only time will tell whether this dangerous mix will play out in our favour or if the country will be thrown back into a deep recession that could take years to recover from.

In international news, US–China tensions have started flaring up again as further trade restrictions and heavy weighted talks are on the horizon. This in turn will have a major effect on emerging markets such as South Africa. Certain banks are even expecting the USD/ZAR to go back up to 18 in the coming months because South Africa’s finance minister does not have enough support or policies in place to react to an ever-strengthening US market.

Data Schedule 

Tuesday 21 July  

∙       ZAR leading business cycle indicator MoM

∙       Expected to be up from previous -5.5%

Wednesday 22 July  

∙       ZAR Retail sales forecasted at -4%

Thursday 23 July  

∙       ZAR Interest rate decision Expected to cut interest rate

∙       GBP Bank of England Haskel Speech regarding government Bond Purchasing   

Friday 24 July  

∙       GBP Retail Sales

Forecasted first Positive number in four months