Rand Report: Positive risk sentiment buoys the Rand

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The South African Rand took a significant hit at the beginning of 2020 as investors fled from emerging market assets in favour of safer investments. Demand for high-yielding and high-risk financial assets are now on the rise, following the World Health Organization’s (WHO) statement suggesting a Covid-19 vaccine could be released to the public before the end of the year. As a result, the ZAR’s ongoing recovery against major currencies is expected to continue in the short term.

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The two events that are most likely to impact the forex market and the ZAR’s value going into the end of the year include the US election and the progress made on the Covid-19 vaccine. With Joe Biden looking like the favourite to win the US election and the prospect of Democrats taking control of the Senate and offering a large stimulus package, market experts anticipate the US Dollar will continue its decline into the new year. Currently, the USD is seen as over-valued due to the nature of the climate and its status as a safe-haven against Covid-19 and general risk sentiment.

Brexit is once again on the front page with the 15 October deadline coming in dangerously quickly. European Union leaders are set to assess progress on Thursday as UK Prime Minister Boris Johnson seems happy to walk away from negotiations if there is no deal by Thursday.

This week, South African retail sales are set to be released. They are expected to climb from -1.1% to 3.5%, which is a good sign of recovery for the struggling South African economy. Mining and manufacturing production numbers are expected to climb by 15% and 5.8% respectively for August, showing an improvement in the country’s major exports sector.

Market event calendar

Tuesday 13 October

  • UK: Claimant count change, unemployment rate
  • Germany: ZEW Economic sentiment index
  • US: Inflation rate, corer inflation rate

Wednesday 14 October

  • AUS: Westpac consumer confidence
  • SA: Retail sales

Thursday 15 October

  • China: Inflation rate
  • UK: Brexit deadline

Friday 16 October

  • US: Retail sales
  • Eurozone: Inflation rate, balance of trade

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Presh JM Reporter

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