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South African rand downward momentum continues |
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02nd Jul 2020

Week ahead: Will the South African rand maintain momentum?

The South African rand gained against the US dollar, euro, and the British pound last week as traders reacted to the upbeat manufacturing PMI and car sales numbers. The currency also gained after the government committed to lower the budget deficit in the coming year. Meanwhile, the US dollar wavered as the number of coronavirus infections in the United States continued to rise. It also reacted to the better-than-expected jobs and PMI numbers. Gold, on the other hand, reached its highest point since 2012 while crude oil received a boost from the falling inventories.
Several important economic data is due this week from South Africa. On Monday, we will receive the country’s foreign reserves. The net reserves stood at more than $45 billion in May. On Thursday, we will receive the May mining data. In April, mining production declined by more than 47% while gold production declined by almost 60%. Analysts expect that this production made a modest improvement in May as the country started to reopen its economy. Also, the statistics office will release the April manufacturing PMI data.
The Canadian dollar rose against its peer currencies as traders reacted to the upbeat trade numbers, falling coronavirus cases, and the relatively stable crude oil prices. This week, focus will be on the Canadian job numbers, which will come out on Friday. Like with the United States, analysts expect that the economy created more jobs than the 289k that it created in May. They also see the unemployment rate falling and wages rising. Additionally, the statistics office will release the housing starts, building permits, and the Ivey manufacturing PMI data.
Last week, the price of crude oil was relatively stable as traders reacted to the falling crude oil inventory numbers from the United States. The numbers also showed that inventories declined by more than 7 million barrels in the previous week. On Tuesday and Wednesday, we will receive the inventory numbers from the American Petroleum Institute (API) and the Energy Information Administration (EIA).

Also, we will receive the monthly report from the International Energy Agency, which is based in France. Most importantly, we will follow the developments between Saudi Arabia and Nigeria and Angola. Last week, the Wall Street Journal wrote of the impending price war between the three countries. The four-hour chart shows that Brent crude oil has been in an upward trend. It is also above the 50-day and 100-day EMAs.

The number of coronavirus cases in the United States has been rising at a faster pace than ever. Last week, the country reported more than 200,000 new infections. And some states have started rolling back their reopening plans. Similarly, companies like Apple and McDonalds closed some of their stores. As a result, there is a possibility that economic recover will slow down once again. This week, we will continue to watch these numbers and how they impact the greenback.
Other key details to watch this week are the Reserve Bank of Australia (RBA) interest rate decision, ISM manufacturing PMI data from the US, machine orders and overtime pay from Japan, and Chinese inflation.