In the latest weekly market review presented by ETM Analytics and TreasuryONE, André Cilliers, currency strategist at TreasuryONE, offers a comprehensive analysis of the current global economic landscape. Against the backdrop of a sunny day in Cape Town and a Springboks victory over the All Blacks, the discussion touched on critical economic issues, notably the challenges faced by China’s economy and the upcoming US labour data release.
China’s economic recovery has been a topic of growing concern, particularly since its delayed reopening following the COVID-19 pandemic. While the Chinese economy continues to grow, it is failing to meet the ambitious 5% growth target set by the state. The slowdown is attributed to various factors, including the ongoing issues in the property sector and declining consumer confidence. The most pressing challenge, however, is the subdued domestic demand, which has had a significant impact on global commodity prices.
Andre highlights the importance of export-led growth for China, stressing that for China’s economy to truly rebound, it requires robust global economic growth. He points out the long-term demographic challenges China faces, which have been exacerbated by years of stringent population control policies. “You can’t keep demographics out of the equation when you look at countries,” Andre says, drawing parallels to the economic struggles seen in Japan and Greece due to ageing populations.
Shifting focus to the US, Andre discusses the upcoming release of labour data, specifically the non-farm payrolls for August. He noted that while there is anticipation for slight growth in payrolls, the more significant aspect will be how this data informs the Federal Reserve’s monetary policy decisions. The consensus among analysts is that the Fed is likely to implement a 25 basis point rate cut in September, with the overarching goal of achieving a “soft landing” for the economy – avoiding a recession while managing inflation. “The economy is not as well as they were hoping,” Andre commented, but he also cautioned against undue pessimism. The data suggests that while the US economy is not booming, it is also not on the brink of a severe downturn.
As for the South African Rand, Andre predicted a relatively stable trading range between 17.50 and 18.50 against the US dollar for the upcoming week. The Rand’s direction will largely be influenced by global economic developments, particularly the US labour data and the broader implications for interest rates and global growth.