Emerging Markets - South African GDP Rebounds, Mexican Peso Could Slip On Wednesday
The South African Rand remains relatively weak against the US dollar, but the currency saw a brief boost in the morning as South African GDP rebounded 4.9 percent in Q2 from a year earlier. Why? Mines that were closed in Q1 due to a power shortage were reopened, leading mining and manufacturing output to jump.
These sectors compose nearly a fifth of economic growth, and helped to pick up of the slack of a 2.2 percent drop in retail, hotel, and restaurant growth. However, these consumer-driven sectors could continue to weigh on economic expansion going forward, as the South African Reserve Bank’s six rate hikes since June 2007 should have a cooling effect on domestic demand. Looking ahead to Wednesday, the Mexican unemployment rate is forecasted to rise to a nearly 4-year high of 4.1 percent in July from 3.55 percent. With signs of weakening growth emerging in Mexico, the news will only add to speculation that the Banco de Mexico will not seek to raise rates further after hiking during the past three policy meetings to the current level of 8.25 percent.
For more in-depth analysis of the South African Rand, Turkish Lira, Mexican Peso, and Singapore Dollar, check out our Forex Emerging Market Weekly.