Foreign Exchange Market Commentary – 06 September 2021

The ZAR market generally seems comfortable around the $/R- 14.5000/14.6000 levels however markets have been “wildly” driven by key data . With the stronger dollar see the key resistant levels on the bottom side at $/R – 14.17000/14.2000 if this does break then we could see a move to the lower levels of $/R14 and maybe even the upper levels of the $/R13.900 – so $/R13.9500/14.000 ish.

Key to watch is perhaps has the dollar been oversold against the G10 currency and do we see a slight correction and move to the stability levels of $/R14.5000/14.6000 – the week will tell.

The Week Ahead: Current account and ECB

Bottom line: We start the week with markets enjoying Friday’s weak non-farm payrolls report. SA markets should be further helped by local data, the current account most importantly, while the ECB is wildcard.

There are five main issues to watch this week:

  • Friday’s weak non-payrolls report plays into the narrative that the Fed will not have to taper in September, implying a continuation of the risk-on and weaker-dollar trends seen since Jackson Hole
  • Powell reconfirmed. Bloomberg speculates that President Biden will likely announce his decision on whether to reconfirm Fed Chairman Powell in his post for another 5-year term (the current term expires next year). Expectations are that he will be affirmed.
  • SA 2Q current account. Given the huge trade surpluses, SA is set to record its highest current account surplus since 1980! Consensus is for a figure of close to 8% of GDP, but it could even be in excess of 10%. It’s hard to think of anything that could remind how amazingly rand fundamentals are at the moment!
  • SA 2Q GDP. A less positive story – while GDP likely grew in 2Q, the economy is hardly blowing the lights out.

The ECB. This is the main global story of the week. While no clear consensus poll is available it appears that a minority of analysts expect the Bank to announce a slowdown in their PEPP (asset purchase) program. This would be bad for risk assets, but good for the euro

 

Source: RMB Markets