File: Appetite towards the rand could fade if December’s retail sales disappoint market expectations.
JOHANNESBURG – The rand extended gains against the dollar on Wednesday, despite the high unemployment figures and disappointing manufacturing production data released earlier this week.
Asian Investors breathed a sigh of relief as the number of new coronavirus cases appears to be slowing. This sense of hope has boosted appetite for riskier assets and emerging market currencies with the rand falling into the category.
At 2.15pm the domestic unit was trading at R14.79 to the greenback.
While the jump in global risk appetite could elevate the local currency higher, appetite towards the rand could fade if December’s retail sales disappoint market expectations.
Retail sales are forecast to rise 0.7 percent year on year compared with the 2.6 percent increase witnessed in November 2019.
If the pending retail sales report fails to meet market forecasts, the rand could depreciate ahead of the State of the Nation Address on Thursday.
Oil sensitive to demand side concerns
Oil jumped more than 1.5 percent on Wednesday amid early signs that new coronavirus cases were slowing in China. This development has eased concerns over the negative demand impact from the outbreak in the world’s largest energy consumer.
However, oil markets are certainly not out of the woods yet with further downside on the cards if economic growth in China ends up decelerating in the first quarter.
On the supply side of the equation, OPEC+ recommended a further cut of 600 000 bpd last week in an effort to limit the painful decline in oil prices, but Russia has been reluctant to commit to deeper cuts.
While WTI Crude could rebound towards $52 and beyond in the short to medium term, the resistance around $54 may put an end to the bull’s party. A breakdown back below $50 should open the doors towards $48.