2021: Cautious
Optimism for FX

Another key difference between 2020 and 2021 is that there is no US presidential election this year. “2021 marks the start of the post-Trump era, which means a very different world for emerging markets,” Paizis says. “There’s more risk appetite, so emerging market currencies are likely to see more strength than they did in 2020, and that obviously presents opportunities for clients in an emerging market like South Africa. We’re already seeing a resilient rand currency, strengthened on the back of greater risk-on sentiment.”

The global COVID-19 vaccine rollout is another significant difference. “On a macro level, very few experts expected the vaccines to come this quickly and to be this effective,” says Paizis. “Barring a few limited issues with some of the vaccines, this seems to be a very effective vaccination programme.”

Buoyed by that positive sentiment, South Africa’s core industries are doing well, with agri-exporters, amongst others, enjoying what Paizis describes as “a fantastic year”.

“Globally, the expectation is that 2021 will be a year of growth,” he says. “It won’t immediately take us back to where we were pre-COVID, but it will certainly be better than people expected in 2020. Then, 2022 might be the year that sees a return to normality – barring any global surprises.”

If 2020 taught us anything, it’s that digital capabilities are key to navigating 2021’s market conditions. “The easier it is to do business from a mobile location, the more successful you’re going to be,” says Paizis. “That’s why Absa has launched services like mobile orders via its Absa Access FX platform, which is now integrated into the broader Absa Access to give clients a single sign-on for all their banking. We understand that you have to make the customer experience digitally enabled.”

Digital solutions like Absa Access are enabling businesses and individuals to operate in this strange “new normal”. And Paizis is confident that the global economy will continue to pick up through 2021. “We’re seeing more cautious optimism and more activity this year, as well as less concern about what tomorrow might bring and what volatility there might be in the currency,” he says. “The general perception is that we saw the worst of it last year.”

And what a year it was. “In March 2020 the feeling was that we were living in bunkers, and the Apocalypse was about to hit,” Paizis says. “But fast-forward to mid-2021 and a lot of that anxiety has gone. There’s a real sense that we’ve lived through it, we’ve seen what it’s all about and we know what to expect. Now everybody wants to go back to normal. That’s a good analogy for the FX market, too. The volatility we saw in 2020 was unprecedented in terms of the speed and magnitude of the moves in the currency. Yet the market reacted very maturely, and everyone came out of it.”

Compared with the gloom of 2020, then, Paizis is painting a picture of optimism for 2021, even if, after the shocks of last year, it’s a cautious optimism.