South African Rand (USD/ZAR) Analysis:
The Balancing Act of the Mid-Term Budget Policy Speech
Finance minister, Tito Mboweni is scheduled to deliver the mid-term budget policy speech at 12:00 GMT after a one week delay. The delay was necessary to account for the funding aspect of President Ramaphosa’s Economic Reconstruction and Recovery Plan, which seeks to stimulate economic activity in key areas of the economy that have been exacerbated due to the coronavirus.
Many observers will be eagerly awaiting to hear the latest developments around South African Airways (SAA) to gauge government’s level of support for failing state owned enterprises (SOEs) as a major taxpayer concern. Also in focus in the need to stimulate small and medium enterprises within the formal and informal sectors as this presents a major opportunity for job creation.
Another huge item on the agenda will be whether there is sufficient wiggle room within the revised budget to fund the initiatives outlined in the economic reconstruction and recovery plan.
Ratings agencies will be keeping tabs on what is being discussed, especially with regard to debt containment with many estimating the debt to GDP[2] ratio is likely to reach 100% by 2023/2024.
USD/ZAR Key Technical Levels
Looking at the daily chart, it is clear that the long term downtrend remains intact. The trend remains steadfast especially when considering the steady decline in volatility (shown by the declining ATR indicator) throughout the month of October.
Chart prepared by Richard Snow[4], IG
