In the week commencing the 26 April, the Kwacha is expected to trade in risk-off mood extending a losing streak given the fading currency conversion steam observed in the previous week. The Kwacha joins the ranks of other emerging and frontier market currencies in bearish trajectory as they nurse effects of a stronger dollar in the COVID era. Dollar index against a basket of 6 major currencies DXY currently pegs above 100.2 as more underwhelming data breeds uncertainty around the state of the global economic health. The copper currency was earlier supported by corporate conversions of dollars to raise Kwacha funding to meet month end payroll obligations while central bank off taker buying reversed partial gains as they shore up foreign exchange reserves in a weak import cover environment. We expect the currency within a 18.55-18.65 while our long term view remains bearish.
The Zambia Statistics Agency (ZSA) is expected to announce April inflation on the 30 April. We forecast the lagged effects of March currency depreciation to be factored into the headline reading to ebb readings 100bps higher to 15%. Zambia’s inflation environment remains elevated given currency weakness and higher operational cost environment persist.
Another wave of PMI’s in red for African nations are expected as Markit Economics release readings in the COVID era. Zambia’s factory pulse is forecast to slide deeper in contraction to 42.5 as business disruption, currency weakness and liquidity effects continue to weigh. Zambia’s peers such as Kenya, Uganda, South Africa and Mozambique are all expected below 50.
Quarterly earnings (prudential) numbers for financial institutions are expected. We forecast earnings growth quarter on quarter with the usual suspects in the profitability sprint.COVID effects will have very little toll on the 1Q20 numbers while its tangible impact will be evident in 2Q20 readings.
The Kwacha Arbitrageur
