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The Rand has shown some strength in the last couple of weeks. On Friday, it reached a month-and-a-half high of R14.57 to the US Dollar. The data coming out this week is likely to dampen the mood as we expect the unemployment rate to increase from a staggeringly high 29% to 29.4% when it’s released on Tuesday.
On Wednesday, the South African Finance Minister Tito Mboweni will be delivering the country’s Medium-term Budget Policy Statement. The budget will show the national accounts of South Africa and it isn’t looking optimistic for the country.
Two major points of concern that Mboweni will be touching on include the tax shortfall after South Africa’s expected tax receipt came in R60 billion short of forecasts and the upcoming Moody’s assessment after the credit rating agency gave South Africa the benefit of the doubt for the last couple of years.
The financial bailout of R59 billion to Eskom continues to cripple the nation and its already poor budget. Should the budget come in worse than expected, it should weaken the Rand and increase the likelihood of a downgrade to junk status from Moody’s, which would be a disaster for the Rand.
In the US, the Federal Reserve will be meeting on Wednesday to hold its policy meeting. With the Rand negatively correlated to the US Dollar, we can expect to see some strength should the US Dollar weaken following the rate decision. The markets largely expect the Fed to cut interest rates by 25 basis points, leaving US interest rates at 1.75%.
Market event calendar
Tuesday 29 October
South African unemployment rate
Wednesday 30 October
Fed interest rate decisionAustralia’s inflation rate
Thursday 31October
EU GDP growth rateChina manufacturing PMI
Friday 1 November
US non-farm payrollUS ISM manufacturing PMI
