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Rand reverses gains to test R19/$ where to next?

Apr 20, 2020
Rand reverses gains to test R19/$ where to next?

 

Port Elizabeth - Another rollercoaster week… what next is the question on everyone's lips?!

It is clear that we have entered the next phase of the Covid-19 pandemic.

At first, it is fear that things might be bad.

Now we know that they are...

...as economic figures, forecasts for growth losses and much more emerged, the breadth and impact of the pandemic's destruction was mind boggling.

The losses and the amount of money government is throwing at economies to try keep them afloat is just astounding.

And as we covered in our webinar last week, this is very likely just the start… the charts do not make for pretty reading, and you need to take action now to protect yourself.

Click here to watch the webinar that has been watched by hundreds of our clients already.

Now let's get into the full review.

 

Key Moments (Apr 13-17 2020)

 

And here were the top headlines from a whirlwind week:

  • Economic destruction - as the economic figures continued to roll in, we began to see devastating effects of the crippling global lockdowns
  • Covid-19 spread continues - well over 2 million cases and the exponential curve continuing, the "flatten the curve" motto is more critical than ever
  • SAA liquidation- the SA government denied funding to SAA...leaving everyone wondering if this is FINALLY the end of the road for the black hole for cash
  • Funding & loans- SA's situation is bigger than just SAA right now, as they are looking to global lenders to try see what can be done to recover from the lockdown period

First things first, Easter Monday was a quiet start with the Rand opening and trading around R18/$ and just above through the week...

But the week was not going to last very long like that, as a slew of events came in the following days!

  • Chinese exports fell 6.6% from a year ago
  • OPEC finalized a historic agreement to cut product by 9.7 million barrels per day, following days of discussions - only for Saudi Arabia to cut prices again!
  • SARB cut interest rates by another 1% and took SA’s interest rate to a historic low of 4.25%. The SARB hopes the lower interest rate will assist in stimulating the economy during the Covid-19 pandemic; where growth and unemployment is predicted to take a massive knock.
  • The US's next week of unemployment figures came out - another 5.25 mil claims, meaning the number of jobs created by the US between Feb 2010 and Feb 2020 have been wiped out in the last 4 weeks!
    With still more applications surely to come...

And that was just a handful of what happened, as more stimulus packages and economic plans were released to try bring everything under control.

The Rand lost its way after Monday, soaring as high as R18.96 by Thursday…

...as the countdown to SA being delisted from the Bond index at the end of the month has really begun in reality along with the extended lockdown.

 

 

And then in other news...

  • There are many varying opinions of how hard hit SA will be during the course of 2020, with so many unknowns, but it is becoming clearer and clearer that it will not be pretty. Moody's forecasts a shrinkage of 2.5%, while SARB has said 4%, while the World Bank has said 6.9-8%… But as South Africa approaches lenders like the IMF to see whether there can be some assistance to get through these times, they are some positives too, as the IMF stated that "South Africa's resilience will help it survive coronavirus".

    Perhaps they will view this in a kind light to give some assistance to get through to the other side. Here is an explainer as to how that could work.

    Other predictions still make for awful reading, with expectations of 1 million job losses and an economic contraction of 10% according to modelling by Business for South Africa…
  • The IMF as a whole however, was not positive. The International Monetary Fund (IMF) released a grim report projecting the concerning scenarios facing global trade this year. An already-in-recession SA economy is forecast to contract by 5.8% and the global economy by 3.0% (the worst since the 1930’s) which is still reeling from the US-China trade war. These sorts of expectations were confirmed by China’s Q1 GDP figures out showing a contraction of 6.8%, confirming that China’s GDP has shrunk for the first time since 1992.
  • One good piece of news that has come out of the lockdown is that is seems that this may finally be the end of the road for SAA, as the government rejected the request for further funding. It may just force the ANC to make some hard choices that it needed to make a long time ago, because the funds are just not there…
  • Over in the US, Trump tried to stabilise the markets between the news of a COVID-19 treatment drug trial and his “we’re starting our life again” 3-phase plan to re-open the US. With the millions of jobless claims coming in, Trump is absolutely desperate to get the economy working again, before a tragedy turns out to an absolute distaster. Trump has also suspended funding to the W.H.O, accusing them of not sharing information promptly and being too quick to believe the Chinese data about the virus in the beginning stages.

And that was just some of what we had on the news front...

The Rand tested close to R19/$ again on Friday before ending a little stronger - it had been another tough and volatile week, but it does take SA one week closer to the end of lockdown.

And that was the wrap!

 

The Week Ahead (20-24 Apr 2020)

 

Before looking into this week ahead, please start with viewing the replay of our webinar: "The Global Crisis Has Begun - Where Are We Heading?"

It is free to access by clicking the link above which will take you to the YouTube replay.

I found the information we presented essential to plan for the future.

And so did hundreds of our clients.

As we look to events this next week, expect a similar trend to this last week...

...more economic figures to shock everyone - as things get appear to get worse before they get better.

What we are seeing now in economic reports is the damage that was done weeks ago already. And with damage still being done as we speak, there is clearly more to come.

But as for the Rand, we will continue to focus on what the patterns are telling us to give an objective view of direction...

 

To get a look at what charts we are looking at and using to give direction, use the link below to get access to the latest forecast. No charge. All yours for 14 days.

Click here to get 14 Day Trial on the house!

 

Looking forward to your feedback.

To your success~

James Paynter

 

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