The SA Daily
03 July 2020
USDZAR below 50 and 100-day MA
Shireen Darmalingam
- The rand has dropped below R17.0 to the USD this week on upbeat global economic data, with global manufacturing PMIs rising in June as countries eased lockdowns.
- The rand is now below its 50-day and its 100-day moving average (R17.71/$ and R17.34/$ respectively) and above its 200-day moving average (R16.00/$).
- SA data too this week has encouraged risk appetite. The BER manufacturing PMI surprised, at 53.9 pts, from 50.2 pts in May, as operating conditions improved when the economy reopened, with lockdown restrictions even further relaxed on 1 June.
- GDP growth too in Q1:20 was not as poor as expected, contracting by 2.0% q/q (saar), after the 1.4% q/q (saar) decline in the preceding quarter, albeit that economic growth remains in negative territory.
- The current account balance swung into surplus in Q1:20, at 1.3% of GDP, from a deficit of 1.3% of GDP in Q4:19. This too exceeded expectations and is the first surplus since 2003.
- Nevertheless, the rand, despite gaining 1.8% this week, is still down 17.7% since January, in line with most EM currencies. The Brazilian real, Argentinian peso and Mexican peso have taken the biggest knocks. As the pandemic is still spreading in emerging markets, EM currencies will remain on the back foot. Indeed, in SA, COVID-19 infections are yet to reach a peak.
- Still, the rand should firm further as global financial market turmoil eases and economic activity resumes. We expect the rand to end the year at R16.50/$ and to average R16.76/$ for 2020.
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