06 – 11 November 2016
The month of November has certainly ushered in a decent dose of political surprises. Whilst there are important economic data expected out next week, if this week is anything to go by, political developments (both locally and globally) will continue to be a key factor driving sentiment and financial markets.
The rand once again found itself in a tug of war, being pulled in opposite directions by various factors. Locally, the state prosecutor’s announcement of the withdrawal of the charges against the Finance Minister, Pravin Gordhan was rand positive. The local unit extended these gains following another surprise announcement that President Jacob Zuma had withdrawn his application to interdict the release of the Public Protector’s state of capture report. The news caused the currency to rally, however, the release of the actual report failed to inspire any further significant gains. Although the initial announcement was also market positive, political uncertainty still looms. Further gains were also muted by political moves abroad – news that the presidential race between Republican nominee Donald Trump and Democratic nominee Hillary Clinton had narrowed, caused the Mexican Peso to come under pressure (the Peso being widely seen as a proxy for Trump’s chances). Other emerging market currencies, such as the rand, were also negatively impacted. Interestingly enough, the US dollar also took the news of Trump making strides badly causing the currency to weaken.
While we continue to track the rand’s performance, here is what can be expected from the local economic calendar next week:
Monday, November 07:
Foreign Exchange Reserves (Oct)
Thursday, November 10:
Mining Production M/M and Y/Y (Sep), Manufacturing Production
M/M and Y/Y (Sep)
In less than a week, the presidential race turned tighter than ever as Republican nominee Donald Trump’s polling numbers spiked after a letter emerged stating that the FBI was looking into new emails relating to Clinton. What seemed like a sure victory for Democratic nominee Hillary Clinton quickly turned into a nail-biting race to the finish line.
Political developments hold the potential to fundamentally change the policy landscape, hence the recent impact on investor sentiment and market trends. Health care is one of the sectors most exposed to the outcome of the US election and the results next week will determine whether the US health care environment will continue to evolve in the direction established by the Affordable Care Act or revert back to a less regulated system. In terms of monetary policy, the Fed has been criticised for sacrificing monetary orthodoxy in order to support growth. Important factions within the Republican Party favour a gold standard or an explicit policy rule such as the Taylor Rule for the Fed to follow. The implications of following a conventional Taylor Rule approach would translate into significantly higher rates than that currently prevailing. One would make the assumption that Fed Chair Yellen would not be reappointed under a Trump administration when her term expires in February 2018.
Markets would prefer a Clinton victory, as it represents “more of the same” in terms of policy, while a Trump win would usher in major shifts in policy and create considerable uncertainty.
Here is what else to look out for on the international agenda:
Sunday, November 06:
Bank Of Japan Monetary Policy Meeting Minutes
Monday, November 07:
EUR Retail Sales M/M and Y/Y (Sep), US Labour Market
Conditions Index (Oct),
US Consumer Credit Change (Sep),
Japan Foreign Reserves (Oct)
Tuesday, November 08:
US Presidential Election,
China Trade Balance (Oct),
German Trade Balance (Sep),
German Industrial Production M/M And Y/Y (Sep)
German Current Account (Sep),
UK Manufacturing Production M/M And Y/Y (Sep),
UK Industrial Production M/M and Y/Y (Sep),
UK Inflation Report Hearings,
UK National Institute Of Economic and Social Research GDPEstimates (3M) (Oct),
Japan Machinery Orders M/M And Y/Y (Sep)
Wednesday, November 09:
UK RICS Housing Price Balance (Oct),
China CPI M/M And Y/Y (Oct)
China PPI Y/Y (Oct),
UK Total Trade Balance (Sep),
European Commission Releases Economic GrowthForecasts,
Reserve Bank Of New York
Thursday, November 10 :
US Initial Jobless Claims ( Nov4)
Friday, November 11 :
China FDI YTD (Oct), China “Singles’ Day”
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