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A horrific mid-year budget from South African Finance Minister Tito Mboweni caused the Rand to nosedive against all major currencies last week. With South Africa’s deficit rising astronomically during the year, we now expect to see a massive rise in national debt in the years to come.
Mboweni cut South African growth forecasts just days before the critical Moody’s credit review on Friday. Fortunately for South Africa, Moody’s (who have given the country the benefit of the doubt on numerous occasions) avoided a downgrade to junk status. The credit rating agency altered their outlook of the country’s credit from stable to negative. This means that any form of downgrade in the future will send the country into junk status and force offshore investors to take their money out of the country.
The Rand recovered quicker than expected following what was a dreadful week for the ZAR. The Rand regained some strength on the back of some Dollar weakness, after the US’s manufacturing numbers were weaker than expected. While Moody’s changed their outlook, they allowed South Africa to retain the all-important Baa3 status which allowed the Rand to find some relief.
With just the one data report out of South Africa this week, the Rand is likely to be driven by the fluctuations of the US Dollar, global risk trends and the South African PMI data (due out on Tuesday). Expectations are that the index slipped from 49.2 in September to 49.0 in October.
Market event calendar
Tuesday 5 November
US balance of tradeUS ISM non-manufacturing PMI
Wednesday 6 November
EU retail salesEU PMI data
Thursday 7 November
Australia’s balance of tradeUK interest rate decision
Friday 8 November
Australia’s monetary policy statementChina’s balance of tradeGermany’s balance of trade
