We could gain from buying emerging-market currencies such as South African rand, Mexican peso and Brazilian real.
ZAR and TRY: central banks bring the action
What may bring the action to the exotic currencies besides the risk sentiment determined by the global situation in the economy? Of course, the central banks.
On Thursday, January 16 two central banks: the Reserve bank of South Africa and the Turkish Central Bank will make their interest rate decisions.
What do we need to expect?
The Turkish Central bank – 13:00 MT time
The regulator keeps struggling with pressure from the government to support economic growth. For instance, Turkish president Recep Tayyip Erdoğan announced that inflation and interest rates will continue to drop in 2020. Thus, easing measures may extend. According to forecasts, the TCB is likely to continue a series of rate cuts and is going to reduce it by 50 basis points to 11.50%. If the cut is larger than the forecast, USD/TRY will rise. Otherwise, we will see a fall.
On the daily chart, the pair is consolidating close to the support at 5.8375. If the lira is supported, the pair will break the current support and target the next level at 5.75. On the other hand, the weaker lira will push the pair up towards the resistance at 5.9195. The next resistance in the bulls’ focus will lie at 5.9640.
The Reserve bank of South Africa – 15:00 MT time
Reportedly, the South African Reserve bank will keep its interest rate unchanged at 6.5%, as the bank needs further details on a February budget and rating review by Moody’s. The rating agency moved the country’s investment rating from stable to negative in November, which was a hurtful decision for the economy of the African country. Thus, any unexpected announcements will move the ZAR.
The daily chart of USD/ZAR shows that the pair is trying to form the uptrend. It needs the break above the 14.47 level to move higher to the 14.5650 level. If the central bank strengthens the South African rand by its comments, the pair will slide to the support at 14.15.
The South African Finance Minister is delivering a budget speech today. There may be a strong impact on ZAR, so what's going to happen?
Let’s consider the best and the worst-performing assets as Monday’s session kicks in.
This week may be the most important since the year started as the Fed assess the economic outlook and the US presents fresh NFP readings.
S&P Global, a private banking company, will release a monthly change in British Flash Manufacturing Purchasing Managers Index (PMI) on January 24, 11:30 GMT+2. The index is a leading indicator of economic health as businesses react quickly to market conditions, and purchasing managers hold the most current and relevant insight into the company's view of the economy.
The United States Bureau of Labor Statistics will publish the US Consumer Price Index (CPI) m/m on January 12 at 15:30 GMT+2. The index measures a change in the price of goods and services purchased by consumers.