The rand has stumbled into the trading week on a shaky note. Photo: Reuters

JOHANNESBURG – A sense of anticipation is set to sweep across the South African economy in the week ahead as investors brace for the latest retail sales data.

Given how consumption accounts for roughly 60 percent of the nation’s gross domestic product (GDP), the pending retail sales will be closely scrutinized by market players. Retail sales are expected to jump 2 percent year on year in September, from the 1.1 percent seen in the prior month. 

A solid report should boost appetite towards the Rand and investor sentiment towards Africa’s most industrialized economy. While Rand will be influenced by domestic economic data, external drivers will also impact the currency’s valuation.

US-China trade developments and Brexit drama will most likely play a role in where the Rand concludes the year. While the local currency could be offered a welcome boost in the event of a trade deal between the world’s two largest economies, this positivity could be quashed by the Brexit uncertainty. 

It must be kept in mind that South Africa is positioned to be one of the many causalities from Brexit as it remains one of the UK’s largest trading partner with total trade roughly $11.6 billion in 2018.

Outside of South Africa, trade developments and economic data from the United States will be under the spotlight. All eyes will on the latest US retail sales figures scheduled for release on Friday. 

Any signs of consumers displaying a reluctance to spend amid trade developments could weaken the Dollar and fuel speculation over the Fed cutting interest rates in December.

In the commodities arena, Gold tumbled to its lowest level in two years below $1457 last Friday amid the improving market mood. Although bulls are losing the battle, the war still rages on as core market themes weighing on global sentiment remain in play. The precious metal has scope to recover if prices are able to break back above $1473.

Focusing on the rand, the currency has stumbled into the trading week on a shaky note with the rand/dollar trading around R14.91 as of writing. Technical traders will continue to closely observe how prices behave around the R14.85 – R14.95 levels ahead of South Africa’s retail sales report on Wednesday.

Lukman Otunuga is senior research analyst at FXTM.

BUSINESS REPORT