The rand has continued its multi-week winning streak, gaining on the back of global developments and inflation speculation. The rand appreciated against the dollar, euro and pound, as US unemployment data brought additional volatility to the markets.
Over the past week, we saw the USD strengthen in anticipation of an improvement in the employment figures, with the release of the non-farm payrolls (NFP) report on Friday. Although there were 559,000 new jobs added in May, the NFP report failed to reach market expectations. Unemployment data led to USD weakness, as investors can expect a continued accommodative policy from the US Fed, via lower interest rates for the foreseeable future.
USD weakness helped the rand continue its forward momentum, gaining on all developed markets during the week’s trade. The GBP/ZAR and EUR/ZAR pairs depreciated by 2.58% and 2.56%, respectively, while the rand gained 2.35% against the dollar. The rand closed the week at 13.445 and 19.015 against the US dollar and the Sterling, respectively.
The rand also appears to be benefitting from a rising trade surplus, as exports have continued to outpace imports over the past 12 months. Partly attributable to rising gold prices, South Africa’s current account has seen a considerable boost, thus bolstering demand for the Rand. However, “the cure to a strong rand is a stronger rand”, as the rising trade surplus is likely to put more pressure on the ZAR in the coming months.
The next major data event on the horizon would be the US inflation data, which is set to be released on Thursday. There remain concerns about runaway inflation and low job growth, so this is set to be a noteworthy data release.
Over in the UK, Balance of Trade figures for April will be released, after March saw a trade deficit reading of -£2B. The UK’s GDP growth rate for April will also be due, after the 1.4% growth in March.
Tuesday will see South Africa release data regarding the country’s GDP annual growth. The previous quarter saw the YoY growth shrink by 4.1% and the current forecast is sitting at -3.2%. This positive turn of events due to strong local commodity prices has surged the rand to its strongest levels since February 2019.
Weekly market events
Tuesday 8 June
US: Balance of Trade (April)
SA: GDP Growth Rate (Q1)
Thursday 10 June
US: Inflation Rate (May)
EA: ECB Interest Rate Decision
SA: Current Account (Q1)
Friday 11 June
GBP: Balance of Trade (April)
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