By Andre Botha, Senior Currency Dealer at TreasuryONE

Over the past week, we saw the Rand giving up most of the gains of the previous week. One of the main reasons for the Rand weakness was the surprise cut of the Repo rate by the SARB of 100 basis points to bring it down to 4.50% and causing a bit of a knee jerk in the currency market. The Rand traded within a 1 Rand range last week with the currency looking like breaking R 19.00 again on Friday evening.

Over the weekend, no a lot seems to have changed with the Rand still treading a little bit of water and still looking like it wants to test the R 19.00 level. One thing that we have seen in the past week is that while the Rand is on a wild rollercoaster ride, it seems to have settled, for now, above the R18.50 level as the overwhelming feeling is that the market is taking a bit of a breather.

One only has to look at the performance of equity markets in the US over the past week also to gain the sense that the market is in a bit of a lull at the moment. The Dow Jones traded in an 800 point spread for most of the week, which given the volatility in the past couple of weeks could be seen as a relatively sedate week.

As the effects of the Coronavirus sweep through the market, we can still expect some volatile days, and in the case of oil, it seems that the floor has fallen from the commodity. US oil prices tumbled to their lowest level in more than two decades as a collapse in demand triggered by the Coronavirus pandemic raised concerns the world is becoming awash with crude that it does not have enough room to store. WTI Oil is currently trading at $12 a barrel for the first time since 1999. It is said that the lockdown procedures in various countries have caused demand to fall by a third, and the supply cuts that were agreed upon by the OPEC+ countries seems to be a little bit too late.

Speaking of the Coronavirus, the current market driver, we have seen the virus continue on its upward trajectory in many countries despite the efforts from governments to institute lockdown procedures. While some countries like South Africa are still in full lockdown, some like Germany have started to relax some of their policies, and it will be interesting to see how and when economies begin to open up again. The line to tread for a county like South Africa is wafer-thin between sacrificing the economy in the name of health and starting to start the locomotive again slowly.

Looking ahead this week the data cupboard is quite bare with no front line data released. This could be the ideal time for the market to take a little bit of a breather, but it also leaves the door open for unforeseen events exaggerating moves should they occur. While we expect this week to be rather uneventful, we can look to next week already where South Africa will be finally sold out of the WIGB index and US GDP data, which can cause some volatility in the short trading week.