The ZAR continues to trade in a narrow band as we draw closer to the end of the year. Some expect to see Rand weakness, as individuals flock to use their annual discretionary allowance before the end of the year, but more focus should shift towards general risk sentiment, local Covid-19 restrictions and vaccine rollouts. South African President Cyril Ramaphosa’s national address last night named the Garden Route and the Sarah Baartman district as new hotspots, adding to Nelson Mandela Bay that was declared a hotspot two weeks ago. Harsher restrictions on alcohol sales, closing times of bars and restaurants, a new curfew from 23:00 to 04:00 and the closing of some beaches on festive holidays were the key takeaways from the President’s address. The Rand seemed unmoved by the President’s action.
In the absence of local data reports, emerging market currencies will likely turn towards global risk sentiment, an outcome regarding the UK’s exit from Europe and the Federal Reserve’s stimulus package to aid the American economy. Counter-currency flows should influence the Rand’s value in the week to come as some of the economic powerhouses begin the rollout of the several different vaccines.
Last week we saw the third quarter’s GDP growth rate check in at a staggering 66% increase, largely due to the second quarter being hindered by stricter lockdown protocol, falling by 51.7% during that time. Mining and gold production figures missed expectations showing that the larger sectors of the South African economy continue to lag in recovery. Fourth quarter consumer confidence beat expectations on Monday as it checked in at -12 after market analysts forecast the figure to come in at -16 from the -23 we saw in the third quarter.
Market event calendar:
Wednesday 16 December:
- UK: Inflation rate Nov
- US: Retail sales Nov
- US: Federal Reserve interest rate decision, FOMC economic projections and Fed press conference
Thursday 17 December:
- UK: Bank of England interest rate decision
- AUS: Unemployment rate Nov
Friday 18 December:
- UK: GFK consumer confidence Dec
- GER: ifo business climate Dec