The tightrope for global markets to walk is very real right now, as they try to balance between the different economic, political and social news and updates.
For the Rand, this somehow seemed to be no bother...
...a quiet week passed us by in terms of market activity, with volatility way down.
As the Rand closed out the week almost where it began, it is necessary to go over the previous 5 days to see what all has happened.
One thing is for sure, this next week is going to be all the more frenetic - best fasten your seatbelts now...
But first, join us for the Rand Review!
It was quite a week of news, and here were the biggest headlines:
- Economic Recovery Plan - opposition parties slammed Ramaphosa's proposal as the "same old" as the economic situation is SA becomes ever more critical
- US Election Heats Up - another US election, another set of leaked emails... the last few weeks of this election are becoming all the more frantic!
- Mini October Budget - as Mboweni prepares for what promises to be his most powerful and direct speech ever, it now seems there may be a delay until a later date...
- Brexit - debates go on, results continue to be elusive for the debaters...where to next?
So as another massive week began, all the focus was on Ramaphosa's proposed plan of action to see how SA was going to recover the economy from the pandemic's battering.
With the Rand opening a shade under R16.50, it was bound to be an interesting week, with markets looking for some direction...
The economic recovery plan was key to this. With the damage from the last few months very evident, with millions of jobs lost, a clear plan to get back to some form of normality was crucial.
However, when this finally rolled around on Thursday, it looked anything but clear.
The DA and FF Plus particularly bemoaned the plan as being void of any real points of action - just more talk, more committees, and no implementation.
One of the few big announcements which had immediate effect was the extension of the R350 social grant - but taking on more debt burden does not get an economy going, as much as the grant is needed for many...
So where this leaves SA for the coming months is not altogether positive - the next point of call is clearly Mboweni's speech, as he is a little more hard-hitting as to the truth (whenever that happens, as there has been a request for a postponement to the 28th).
However, if there is real change, it has to come from the top of the chain - Ramaphosa is responsible...
One would have thought that this speech would have hurt the Rand - and for once the market reacted rationally, as hurt it it did...
And then in other news...
- Another week, another stall of US stimulus, as despite supposed progress being made, no deal between Treasury's Mnunchin and the House speaker Pelosi. It was a game of cat and mouse as the two wrestled to get the upper hand to make sure that IF stimulus was agreed upon, it was clearly their win and their deal, not the other party's doing. It had been completely politicised, and meant the gridlock continued. The IMF did not seem concerned and as their managing director commented that she has "No doubt" that the crucial stimulus is coming "because it is needed". The IMF's meeting comes at one of the most critical times, in the midst of a historic recession. They encouraged those with any flexibility in their finances to make use of them for the people in their country, as households needed support.
- The stimulus talks in the US are very much tied up with the upcoming election which is hurting towards D-day with every day bringing more news, accusations, surprises and more. Once again, just before election day, we have had release of "smoking gun" evidence in emails, as Joe Biden and his son Hunter were in the spotlight over some alleged emails that linked them all up together with Ukraine and Chinese business deals while Biden was Vice-President. To make matters worse, the report from the New York Post was completely censored by Twitter and Facebook, creating a massive uproar across the board. Things are little hazy right now, but the next few weeks promise to be very interesting, with this, the Stimulus talks and the Supreme Court Justice vote for Amy Barret…
- Over in the UK, their own politics were playing out over the Brexit talks. As the week went on, the EU tried to put more and more pressure on the UK to come up with a deal, compromising on their requests to get something passed. When it came to Friday however, Boris Johnson poured cold water on all talks by saying that talks are effectively "over" and that there is "no point" in continuing talks next week unless the EU was prepared to discuss the detailed legal text of a partnership. If a deal is not done, the UK will do business with the EU according to the WTO's default rules. In this scenario, the EU would impose its tariffs on imported UK goods - pushing up the costs of items such as food and cars - and the UK would do the same to the EU.
And as for the Rand...well, it continued to ride through the midst of local and global minefields, managing to move sideways for most of the week.
After Thursday's weakness on the day of the economic recovery plan being revealed, the market recovered in to Friday, breaking from over R16.70 to test R16.50 again.
So we were basically back to where we began, as the Rand closed out South African day at R16.52/$, not far from where it opened!
Where to next is the question, as we head into a frantic end of year...
The Week Ahead (19-23 October 2020)
As we look to the week ahead, we have few fundamental events as triggers if Mboweni's budget is postponed, with the main ones being:
- SA - Unemployment Rate Q3, Mid Term Budget (this is likely to be postponed)
- USA - Jobless claims, Presidential Debate
- UK & EU - Consumer Price Index
But expect another week of action, with US politics likely to again take centre stage. As we head into the final couple of weeks before the elections, all eyes will be on the next presidential debate and stimulus talks, with the Biden families dealings with Ukraine and China, and Facebook and Twitter's censoring being pulled into the spotlight.
As for the Rand, we will keep looking at our Elliott Wave based forecasting system to give us some clues, with some key levels that we will be watching to confirm the larger degree trends.
Another interesting week lies ahead!
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