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The past week has been dominated by the Jackson Hole Symposium in the US, where Central Bank governors from the major economies come together and outline the plans for the following year. Since we have come from an extremely turbulent time, in the world and the markets, this was watched extremely closely. On Thursday we had US Fed Chair, Jerome Powell, discussing the future of the US Fed and its policy decisions. The main takeaway from this was that the US will be relaxing its stringent inflation targeting approach and will focus on supporting job creation. Thus we probably won’t see the Fed raising interest rates any time soon. This immediately put major pressure on the USD and on Friday, we saw the USD/ZAR hit R16.55. The prospect of a long-term low rate environment in the US, together with optimism regarding a Covid-19 vaccine, was supportive of the developing economies such SA. We saw broad-based optimism in the markets.
The data from the past week was generally supportive of the global economies bouncing back from the various lockdowns worldwide. There have been headwinds against the pound in terms of a breakdown in Brexit negotiations, which seem to have hit yet another stalemate, with both sides seeming to feel the other is being uncooperative. This tension will continue to halt any broad-based return of the GBP to its once powerful stance as a global currency. We saw the GBP/ZAR trade on the brink of R22 multiple times over the past week, being rejected yesterday (Monday) and moving back to the high 22s. This could, in part, be due to reports that SA President Ramaphosa was considering cabinet changes in an effort to revitalise the hard-hit economy. Although this should be ZAR positive, SA doesn’t have a good history of cabinet reshuffles in the past, thus this could have caused certain major market participants to sell first and ask questions later.
For the new week, we look to see if this sudden ZAR weakness persists and if the USD weakness will continue. On the data front, we have EUR CPI today, which is expected to be positive and thus EUR supportive. The remainder of the week is generally quiet, with the most noteworthy event being US Non-farm Payroll data on Friday; this should be improving and thus USD supportive.
Tuesday: 1 September
- EUR CPI Data
Wednesday: 2 September
- Australian GDP data
Thursday: 3 September
- EUR Retail sales
Friday: 4 September
- US Non-farm Payroll & Employment data