ZAR kicks off the week on the back foot
The ZAR had a relatively stable performance in the preceding week. However, the (PPI) data, signalled potential trouble.
The South African Rand (ZAR) began the week of 4 September 2023 on the back foot, facing a significant weakening against its major peers. This decline, exceeding 1%, was largely influenced by a worsening Chinese economic outlook and the cautious anticipation of higher US nonfarm payrolls data. While the rand faced headwinds, the week ahead promised more insight into its trajectory.
ZAR STABLE PERFORMANCE
South Africa’s currency had a relatively stable performance in the preceding week. However, the market’s focus shifted to the producer price index (PPI) data, which signalled potential trouble for the rand. Both month-on-month and year-on-year PPI figures for July came in below expectations, raising concerns about producer prices potentially declining. While this could ease inflationary pressures, the market’s reaction was swift and adverse. The rand faced a selloff, driven by the perception that the South African Reserve Bank (SARB) might pause its rate-hiking cycle or even consider rate cuts in the near future. It’s essential to remember that this is just one data point, and the possibility of another rate hike by the SARB remains on the table.
THE Q2 GDP GROWTH FIGURES UNVEILED ON TUESDAY
This week, investors’ attention will turn to Tuesday when the Q2 GDP growth figures will be unveiled. Projections suggested a slight dip in the quarter-on-quarter data, dropping from 0.4% to 0.1%. However, the year-on-year data was expected to show an increase, climbing from 0.2% to 1.2%. These figures could provide a clearer picture of South Africa’s economic recovery and influence the rand’s performance.
On Thursday, the focus will shift to South Africa’s current account data. While a widening deficit is anticipated, the extent of this change remains uncertain. The rand’s performance in response to this data would depend on the magnitude of the deficit and its implications for the country’s balance of payments.
The rand’s outlook for the week was influenced by both domestic and global factors. The Chinese economic situation and its impact on global markets played a significant role in the currency’s performance, highlighting the interconnectedness of the global economy. Additionally, the higher US nonfarm payroll data added an element of uncertainty, as it hinted at the possibility of the US Federal Reserve considering rate hikes. However, this remained speculative, and the market awaited further clarity.
UPCOMING MARKET EVENTS
Tuesday, 5 September
ZAR: GDP growth
AUD: RBA interest rate decision
EUR: ECB President Lagarde’s speech
Wednesday, 6 September
AUS: GDP
EUR: Retail sales
USD: Services PMI
Thursday, 7 September
EUR: GDP
AUD: Trade balance
ZAR: Business confidence
Friday, 8 September
EUR: Germany CPI
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