26 Jun 2017

Week Ahead: Trade, credit and labour market data to reflect the weak economic growth backdrop

Annabel Bishop

Chief Economic

Local developments continued to dominate rand dynamics with the currency breaching 13.00/USD during the course of the week, following the Public Protector’s suggestion to change the SARB’s constitutional mandate.  

Week Ahead Figure 1

Ratings agencies have since cautioned that institutional weakening would contribute to further sovereign credit rating downgrades. Heightened political and institutional uncertainty arising from the March cabinet reshuffle were highlighted key reasons for the credit rating downgrades in April (S&P and Fitch) and in June (Moody’s). 

Credit rating downgrades on SA’s local currency debt by all the agencies to non-investment grade would trigger key government bond indices exclusion (for example the Citibank World Government Bond Index), resulting in portfolio outflows and likely an episode of sustained rand weakness.

At the time of publication, the rand steadied at 12.95/USD, aided by a slightly weaker USD and market relief over the SA constitutional court ruling that the vote of no confidence against the President may be held in a secret ballot.

The rand is expected to trade in a range of R13.45/USD – R12.45/USD, R15.00/EUR - R14.00/EUR and R17.00/GBP - R16.00/GBP.

Week Ahead Figure 2

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