The South African rand had some respite after a week where the currency initially weakened quite dramatically but ended in the green and strengthened against 16 of the 19 currencies we monitor. The most notable gains were against the Chinese Yuan (1.95%) and the Japanese Yen (1.87%), whilst the most significant weaknesses were against the Brazilian Real (-1.74%) and the Polish Złoty (-0.94%).
The main event last week was the inflation data for July. Year-on-year inflation hit heights last seen in the global financial crisis of 2008. This could signal that the South African Reserve Bank will be even more aggressive in its rate-hiking cycle going forward.
This week, there will be limited South African data, so we will look to global factors to influence the movements in the ZAR. A minor event to monitor is the balance of trade for July, which is expected to narrow. This is not surprising as energy import prices increased, and gold prices dropped.
For global data the USD’s moves were muted throughout the past week, with a positive skew as the week progressed. The market was awaiting the keynote speech by Fed Chair, Jerome Powell, at the annual Jackson Hole Symposium on Friday. As he delivered his address, he reiterated the Fed’s commitment to raise rates and his view that the economy was still strong. The market seemed to back the USD and the currency strengthened.
This week, there will be a range of data being released to show the current US employment situation. On Wednesday, the ADP employment change for July will be released and is expected to increase substantially. This is followed by initial jobless claims, which will be released on Thursday and are expected to remain constant at 243 000. Finally, the highly anticipated nonfarm payrolls data will be released on Friday. We expect this to be a massive market mover as it is predicted to drop from the extreme 528 000 figure last month, to a more realistic 300 000. Any deviation from this will be a definite cause for market volatility.
This week, there will again be minimal UK data, so we look to see if the currency can regain some of its shine after a few weeks of rather dismal performance. Additionally, we expect the market to be rather subdued before the final vote for the new British Prime Minister. Currently, polls favour Truss over Sunak. The results will be released on 5 September.
Upcoming market events:
Wednesday 31 August
USD: ADP employment (Aug)
CAD: GDP (Q2)
Thursday 1 September
USD: ISM manufacturing PMI (Aug)
EUR: EU unemployment (Jul)
Friday 2 September
USD: US nonfarm payrolls (Aug)
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