After some volatile trade following the US presidential elections, the ZAR ended last week more or less flat against a much stronger USD. The markets are still waiting for the final outcome of the Congressional elections, in particular the House of Representative seats that were up for grabs, although it appears a Republican sweep is all but certain. This was already being priced in after Donald Trump’s emphatic election victory, meaning the market’s reaction to the outcome is unlikely to be very big unless there is a shock Democrat comeback.
In the meantime, the focus has shifted across the globe to China, where Beijing introduced a 10 trillion yuan support package on Friday to ease local government financing strains. The package marked a departure from more direct stimulus strategies to revive growth, and came as a disappointment to markets expecting a so-called ‘fiscal bazooka’. However, more stimulus is incoming as China’s longer-term outlook is clouded by Donald Trump’s threat of tariffs in excess of 60% on all Chinese goods. Given South Africa’s strong trade ties with China, the ZAR’s longer-term outlook is heavily dependent on China’s growth trajectory. Any news on this front, especially positive developments, thus holds the potential to be market-moving for the ZAR.
Looking at the week ahead, US CPI numbers for October will headline an international data card that also includes Eurozone, UK, and Japanese GDP prints. Meanwhile, on the local front, Q3 unemployment stats, September manufacturing production numbers, and mining output data are all scheduled for release. None of these hold much market-moving potential at the moment, with investors more focused on the changing global backdrop.