With the US dollar trading above parity against Euro, we have seen markets turning "risk-on" before the ECB meeting tomorrow. We have also seen Gold trading higher, which in conjunction with the weaker US dollar, has helped EM currencies today. The Rand has flirted with breaking below the R18.00 level, and it seems that there is some momentum in the short term that could see us testing the R17.90 level. The key will be the ECB meeting tomorrow, where the expectation is a 75 basis point hike in the Eurozone interest rate, and much attention will be focused on the press conference after the announcement to suss out the mindset of the ECB.
MTBPS didn't affect the Rand
The MTBPS was delivered without much incident on the markets, some of the key takeaways were that the government plans to take over between a third and two-thirds of Eskom's debt, but we'll have to wait until February for the details. Other state companies, including the roads agency and the rail and ports operator Transnet, get bailouts, the total package of around R30bio. The budget deficit narrows faster than expected, to 4.9% of GDP in the current fiscal year (that compares with the 6% forecast in February). It sees the first primary surplus in 15 years in the 2023-24 fiscal year. No new taxes are envisaged for now. South Africa Sees Debt Peak 71.4%/GDP in '23 versus the peak of 75.1% in '25 in the Feb budget. Godongwana doesn't say how much they will offer for state-worker pay increases for next year, although the total wage bill is seen increasing by 3.3% over the next three years. Also, the R350 grant will be extended to the end of March 2024.
