Another choppy week for the Rand saw it touch its worst levels in a few weeks before its fortunes turned around and it managed to regain its losses plus some, before losing ground by the weekend...

Plenty of volatility too, thanks to global and local pressures.

It really does seem as if 2020 is going to be a year to remember when it comes to financial markets and the global economy.

So many things to watch - so many possibilities of what can happen.

As for the Rand, it is right there in the thick of it all.

So let's get into this pst week to see if it can give us some idea of what is going to follow through the rest of this year...!

Here were some of the biggest talking points from the 5 days:

  • Eskom & SAA - these two SOEs are absolutely critical to SA's future, particularly when it comes to foreign investment...
  • IMF Growth forecasts - global and local forecasts showed a rather sorry sight when it comes to 2020...
  • Davos - global leaders got together to discuss the way forward on many fronts, with many interesting discussions taking place
  • Trump Impeachment - the Senate debated Trump's impeachment, leading up to the finale vote on whether the President will be removed from office

To start the week, the market opened around R14.45, but it wasn't long before that changed...

The Rand got off to a dismal start, pushing higher over R14.50, to almost touch R14.60 before we saw it reverse sharply and strengthen back down to below R14.30.

So some real turbulence, much in line with SA's economy, which has been battling with headwinds thanks to entities like SAA and Eskom.

SAA is still on its last legs, with over 30 canceled flights this last week in an attempt to not make more of a loss...

...but losing business in doing so, further hurting its image and perceived reliability globally and locally.

The government is still looking for R2bn just to keep it afloat, and it feels like this path has not got much further to go before it ends in complete shutdown - which was the right answer many years ago already.

And the worry is that Eskom goes the same way, between the corruption, sabotage, theft and mis-management. New CEO Andre De Ruyter has got a task and a half on his hands to try and right the ship, and so far he has managed to stop the load shedding each day as production recovers...

...his promises are that "Big changes are coming" and there are talks for a loan facility of R15bn to be opened for Eskom, which is government backed. He also related Eskom to a bicycle without a chain...or cyclist to steer it.

The fact is this: Unlike SAA, which is not critical to the country's function to the same level, Eskom is just too big to fail, with load shedding in 2019 having cost the economy at least R59bn...scary!

As for the Rand while all of this happened, it tracked back down from its R14.60 perch...before retracing back above R14.45...

And then in other news...

  • IMF Growth reports surfaced for the global economy and locally...and once again, these did not make for pretty reading. SA's expected 2020 growth now sits at 0.8% following the Eskom debacles. It will cause further frustration for Finance Minister Tito Mboweni, who still does not seem to be listened to despite his position, with the Treasury commenting this last week that "Mboweni's economic plan for SA still not adopted by government"
  • SA's inflation however is looking pretty, coming in at 4% which is well within the expecations and desires of SARB. Which begs another question in line with Mboweni's thoughts, as to why the ANC wants to nationalize the Reserve Bank when all is working well!
  • SA’s A-team (minus President Ramaphosa) headed to the World Economic Forum in Davos in search of further global investment. Finance Minister Tito Mboweni and co. hope to be returning to local shores with an additional investment of $3.4b annually over the next 10 years. However, their biggest challenge will be to convince investors as to Eskom and how things are going to work for electricity supply in the coming years.
  • Trump's Impeachment is now in full swing with the trial taking place in the senate this last week. The Democrats and Republicans each get 3 days for their arguments either for or against, and then there the vote should follow shortly after that. If Senators vote to impeach Trump, he will be removed from office. If not, it will pretty much be business as usual...
  • Coronavirus, the next world crisis, seems to be taking center stage. A new virus which currently has a 2% death rate in all who catch it, comes from a town in China, but is fast spreading worldwide, to Thailand, Korea, United States and potentially more nations. Many fear the effect this will have on the global economy, and some investors seemed rather jittery...
  • While over the border in Zim, it seems their critical situation is finally being recognized on the world stage, with the EU committing R270m in emergency food aid to the country. This is a small step in the right direction, as wholesale changes are needed to turn the country around from complete devastation.

And that suddenly was the wrap...

The Rand tracked as low as R14.27 on Thursday before pushing back above R14.45 on Friday, but managed to then gain some ground to end the week back below R14.40 on Friday - and another week passes with a range bound market.

And now it is time to look ahead to the next week before we do it all over again!

The Week Ahead (27-31 Jan 2020)

The month of February is almost upon us, and it promises to be quite a month...

  • Brexit is in a couple of days away...
  • SA's Investment Rating is on the line with Moody's due to make a call soon
  • Andre Du Ruyter needs to save the sinking ship Eskom before it's too late to bail the water out
  • Trump's impeachment trial in the Senate continues...

Not to mention US & BoE Interest Rate Decisions, and SA Balance of Trade this next week, so don't expect the rollercoaster to stop just yet

Where does this leave the Rand?

Once again, we will be seeing what the Elliott Wave patterns are telling us, not the news. the current outlook is for some initial Rand strength, but there are certain key levels we will be watching over the next few days to give a few clues for the weeks ahead.

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Look forward to hearing from you.

To your success~

James Paynter

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