The South African Rand remained on the backfoot last week. A bleak local economic outlook, coupled with broader market risk-off sentiment, led the ZAR further into murky waters.
There was some noteworthy data out of South Africa last week. Producer price index ( PPI ) figures for March indicated a 1% (MoM) rise in producer prices. This inflationary pressure came in lower than the expected 1.4% reading, highlighting a cooling in price rises. This PPI figure comes after the 0.6% uptick in February.
Additionally, the leading business cycle indicator fell by 0.7% in February, despite an anticipated 0.2% improvement. This reading adds to the 0.2% decline in the prior month, highlighting the slowdown in economic activity during the early part of the year. This has likely been exacerbated by the chronic power outages throughout the country.
Balance of trade data was also released last week. South Africa recorded a trade surplus of R6.89 billion as of March. The country’s trade position declined, shrinking from R10.71 billion, despite market expectations for a rise in trade surplus towards R25 billion.
The South African Rand had yet another tumultuous week of forex market performance last week. The GBP/ZAR pair made the most notable move, appreciating 2.07%. The hefty momentum was supported by recent GBP tailwinds, resulting from recent UK inflation data. After kicking off at R22.52 on Monday, the GBP/ZAR pair moved to the upside and broke through the R23.00 resistance level, before topping out at R23.04. The pair closed the weekly trade at R22.96 on Friday.
The EUR/ZAR pair also experienced some significant upward momentum, rising 1.31% higher. The pair opened at R19.90 and reached a weekly high of R20.42, before retracting and closing at R20.15. Recent Euro strength has been supported by risk-off investment sentiment.
Despite being the smallest mover of the three, the USD/ZAR pair gained 0.92% during the week. After kicking off at R18.10 and reaching a maximum price of R18.45, the pair ended weekly trade around R18.27.
This week will be rather light on the South African data front. Nevertheless, ABSA manufacturing PMI data for April will be released. April’s S&P 500 Global PMI reading will also come due.
This week, the US Federal Reserve interest rate decision will be released on Wednesday. Markets are anticipating a 25-basis point (bps) rate hike from 5% to 5.25%. Any deviation from these expectations will undoubtedly bring added volatility to global financial markets. The nonfarm payrolls report for April will also be released on Friday, along with the US unemployment rate. Balance of trade figures as of March will come due on Thursday.
The European Central Bank’s next interest rate decision will be released on Thursday. Policymakers are expected to raise rates by 25 bps, up from 3.5% to 3.75%, with the aim of bringing inflation down to a more appropriate level. The Eurozone’s flash inflation rate for April will also come due. The unemployment rate for March will be released today, 3 May. Retails sales figures will also be released, providing additional insight into the state of the European economy.
The UK will encounter another slow data week, with little to look out for from that part of the world.
Upcoming market events
Tuesday, 2 May
- EUR: Inflation rate flash (April)
- USD: JOLTs job openings (March)
- AUD: RBA interest rate decision
- ZAR: Manufacturing PMI (April)
Wednesday, 3 May
- USD: Fed interest rate decision
- USD: Fed press conference
- USD: ISM services PMI (April)
- EUR: Unemployment rate (March)
- NZD: Unemployment rate (Q1)
- ZAR: S&P Global PMI (April)
Thursday, 4 May
- EUR: ECB interest rate decision
- EUR: ECB press conference
- EUR: Deposit facility rate
- USD: Balance of trade (March)
- AUD: Balance of trade (March)
Friday, 5 May
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