The year has certainly continued where 2020 left off, as we see markets continue to whip to and fro.
Is the new normal here to stay?
That is certainly the question on everyone's lips - as we head into what looks like another year of uncertainty.
And as the US experiences some of the most ferocious winter weather in history, Oil prices sky-rocketed amidst rolling blackouts in states like Texas - who was hopelessly under-prepared for the storm.
This makes for a rather rocky start for the Biden administration, as they are forced to deal with local issues instead of moving forward with their agenda.
All the while as Americans await their stimulus cheques...
...and emerging markets look on in anticipation!
But let's get into the full review...
Here were the major headlines from the 5 days:
- US Winter Storm - chaos in Texas and in multiple states, as travel ground to a halt, and millions were left without power for days in below freezing temperatures!
- Retail Sales - a scary figure to show how general consumers are feeling right now about the economy and 2021 as a whole...
- Bitcoin Turns 50 - who would have thought...the original Cryptocurrency Bitcoin has now broken through to hit all-time highs of OVER $50k!
- US Jobless - a second straight month of increases saw the Dollar weaken further, as the return to normal seems far away...
To start the week, the Rand celebrated its 60th birthday, and traded lower to hit it's strongest level of 2021 at R14.40/$!
It has been a long history for the ZAR, as documented by Fin24. What a devaluing there has been since days gone by, when the Rand was in fact once stronger than the USD!
We held at these levels until Tuesday, but then the tide began to go out, and the winds of change came in...
By close on Tuesday, we were back over R14.60.
By Wednesday afternoon, that number had become over R14.80!
The Dollar was busy forging a mini-recovery, despite the turmoil that the country was in with winter storms causing absolute chaos.
Texas, an unusual candidate for even having snow, has been sideswiped by a major polar snow storm, which has crippled the electrical grid, with heavy load-shedding and power outages resulting in dangerous levels of cold in millions of households. It is one thing having load-shedding locally in SA where the climate is a bit more fair, but what about when you are well below freezing point for days on end? A major inconvenience and frustration becomes small in comparison to life threatening cold!
Oil soared over $60 a barrel as wells in Texas shut.
By Thursday, most power was back, but still more than 500,000 houses and businesses were in the dark. Many houses were still left without drinking water.
Storms hit other states such as Kentucky hard too, with masses of snow and below-freezing temperatures crippling business.
And yet the Dollar strengthened?
Riddle that one...
And then in other news:
- Locally, retail sales are always a good indicator of how consumers are feeling - are they buying, are they saving, are they just scraping through? Well, the stats came in for December 2020, showing another contraction with a tight Christmas, making for 9 straight months of decreases in retail sales. Retail sales include what is done online, and it was estimated that during the first lockdown, online retail sales increased 40% - but still, businesses are looking for and needing some kind of turnaround soon.
- SA’s annual budget speech to be delivered on 24 February is drawing near. Finance minister Tito Mboweni might have some wiggle room in the budget as tax revenue collections show a surprising upswing. This will hopefully prevent big tax hikes, cover some vaccination cost, and provide for the extension of grants.
- Back in load-shedding central, local power supplier, Eskom, received approval for increased rates (+15%). This news seems to have caused minimal movement in the rand, indicating local politics and major events still take second place to the whims of the major players in the currency space.
From what Eskom's De Ruyter is saying, we are not expected to see an improvement until September (7 months away!) with Load Shedding continuing until then...
- Pravin Gordan pronounced on SOE's that they have been honey pots of state capture, but that they will find the stolen money. This plays very much into the Eskom situation right now, as it has been a black hole of corruption for too long, and now it is starting to show that lack of maintenance has been done and the power grid is under severe pressure because funding has been stolen.
- Bitcoin continues to amaze, breaking through the physiological level of $50k, an incredible milestone. The total market cap of Cryptocurrency is now sitting at over $1.6 trillion, an amazing figure which seemed impossible just a few short years ago. The market has been in an amazing bull run for 2 years now, although the majority of the gains have all come in the last 10 months or so. BUT...always remember, with any market, when sentiment nears an extreme (of positivity or negativity), then the market is due for a change in sentiment.
- The Dollar took another hit as 861,000 Americans filed for unemployment and this was the second straight increase in the figure, crushing high hopes of a swift return to normality and economic growth.
As for the Rand, the volatile and uncertain week continued!
We saw the market zigzag in the R14.75-14.50 range through Thursday and Friday, with uncertain traders a little jittery.
And so we await another week, looking to see what the Rand has in mind for the remainder of February and Q1 2021...!
The Week Ahead (22-26 February 2021)
As we look to the week ahead, apart from all of the other points we have discussed, there were a number of economic events:
- SA - Unemployment Rate, National Budget, PPI, Balance of Trade
- USA - GDP, Fed's Chair Powell, Jobless Claims, Durable Goods Orders, Trade Balance
- UK & EU - Unemployment Rate, CPI, BoE Monetary Policy Report Hearings
Once again, we have plenty of potential triggers for market moves - not that the market needs any news or event as a trigger!
It seems we have learnt to expect the unexpected!
The Rand has had a considerable good run this month, before seeing some reverse of fortunes - and we continue to monitor some key levels to confirm our wave patterns (based on our Elliott Wave based forecasting system) and give us some direction for the days, weeks and months ahead.
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Look forward to hearing from you.
To your success~