Rand Report: Rand turbulence ahead of US jobs data

The rand had a mixed performance last week. In the absence of significant local data, the rand made moves in line with global developments. The most significant local factor was the temporary slowdown of loadshedding, which allowed the rand to marginally recover from its recent lows.

After gaining some traction against developed-market currencies during the early rounds of the week, the emerging market ZAR experienced a partial correction. This can be largely attributed to the surge in USD strength, ahead of Friday’s nonfarm payrolls (NFP) report. NFP data indicated that the US added an additional 263 000 jobs in September. Furthermore, the unemployment rate fell to 3.5%.

Consequently, the Dollar Index (DXY) rose by 0.60% during the week as positive economic data allowed the USD some breathing room. USD/GBP moved 0.68% higher, while USD/EUR experienced a similar 0.60% appreciation. The rand followed along with this, moving on a counter-balancing currency basis.

The GBP/ZAR pair declined by 0.81% during the week from an open of R20.26. After briefly breaking through the R20.00 support level, and reaching a low of R19.94, the pair encountered a trend reversal and ended at R20.08 on Friday.

The EUR/ZAR took a similar route, moving 0.61% lower. After opening at R17.71 on Monday, the pair declined during the beginning of the week and reached a low of R17.46 before ending the week at R17.65.

The USD/ZAR did not make a significant move last week compared with its GBP/ZAR and EUR/ZAR counterparts. The USD/ZAR pair kicked off the week at R18.07, traded within the R17.57 – R18.17 band, before closing at R18.12 on Friday.

For South African data, the manufacturing production figures for August were released yesterday (11 October). Manufacturing production rose by 2.1%, after a 0.1% downtick in July. This figure exceeded the 0.8% growth consensus, adding momentum to the local economy. Manufacturing production now sits 1.4% higher on a year-on-year basis

Gold and mining production figures will be released on Thursday. Mining production is expected to decrease by 7.5% (YoY), indicating deflated production levels when compared to the previous year. However, mining production is expected to increase by 2% (MoM), highlighting the recovery towards previous levels.

For global data, UK employment data was released on 11 October. The unemployment rate came in at 3.5% in August, down from 3.6% in the previous month. However, claimant count rose by 25 500 in September, indicating a slowdown in the job market. Additionally, GDP growth figures will be released today for the month of August. This will provide additional insight into the state of the local UK economy.

In the US, the September inflation rate will be released on Thursday. Inflation is expected to decline slightly from the 8.3% reading in August.  PPI data for September will be released today.

The Federal Open Market Committee (FOMC) minutes will also be released this week, along with retail sales data for September.

Upcoming market events

Wednesday 12 October

USD: Producer price index (September)

USD: FOMC minutes

GBP: Gross domestic product (August)

EUR: ECB President Lagarde speech

EUR: Industrial production (August)

Thursday 13 October

USD: Inflation rate (September)

ZAR: Gold production (August)

ZAR: Mining production (August)

Friday 14 October

USD: Retail sales (September)

EUR: Balance of trade (August)

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