Rand Report: Rand Recovery Continues as the SARB Raises Rates

  • Forex Analysis
  • Editor's Pick

Last week, South Africa released some important data. The South African inflation rate came in at 7.6% for October, up from last month’s 7.5%. Despite an expected decline to 7.4%, it appears that price pressure remains elevated. This can largely be attributed to rising prices for transportation and fuels, as well as food and beverages. Nevertheless, inflation remains below the high of 7.8% in July.

Additionally, South African PPI data was released on Thursday. Producer prices came in 16% higher on a year-on-year basis, in line with market expectations. This was lower than the 16.3% reading from the prior period and is the lowest PPI figure recorded since May. This is the fourth consecutive decline in PPI and could indicate that forward-looking inflation is cooling off, although substantial further declines will be necessary.

The South African interest rate decision was released on Wednesday. As expected, the South African Reserve Bank (SARB) opted to raise interest rates by 75 basis points to 7.0%. This is the seventh consecutive rate hike since last November as part of the SARB’s attempt to bring inflation back towards the midpoint of its target range.

The most significant US event was the release of the FOMC meeting minutes on Wednesday. The minutes hinted at the prospect of slowing the pace of interest rate hikes, pointing towards a significant change in the Fed’s policy outlook. The US Dollar sold off because of this, with the Dollar Index (DXY) declining by 0.81%. The USD/ZAR pair made a similar move, depreciating by 0.91% during the week. After opening at R17.22 on Monday and reaching a low of R16.90, the pair closed off at R17.08 on Friday.

However, the Rand was unable to overpower recent GBP strength, which comes after UK inflation reached a 40-year high. Market participants are anticipating that the Bank of England will implement another rate hike in their upcoming meeting to curb this price pressure. This helped to bolster the Pound. Consequently, the GBP/ZAR pair moved 0.85% higher. After opening the week at R20.52 and topping out at R20.75, the pair closed at R20.66 on Friday.

This week, the South African unemployment rate for Q3 will be released today, 29 November. Unemployment is expected to rise to 34.3%, after recording a 33.9% unemployment rate in Q2. The country’s balance of trade for October will be released on Wednesday and is expected to rise from R19.7 billion to R24.0 billion.

There will be a whole host of labour market data from the United States, including the Q3 GDP growth rate, ADP employment change, JOLTs job openings on Wednesday and the November unemployment rate and nonfarm payrolls data on Friday.

For European data, the inflation rate for November will be released on Wednesday and the October unemployment rate will be released on Thursday.

Upcoming market events

Tuesday, 29 November

ZAR: Unemployment rate (Q3)

Wednesday, 30 November

ZAR: Balance of trade (October)

EUR: Inflation rate (November)

USD: ADP employment change (November)

USD: JOLTs job openings (October)

USD: GDP growth rate (Q3)

Thursday, 1 December

EUR: Unemployment rate (October)

USD: Personal income and spending

USD: ISM manufacturing PMI

Friday, 2 December

USD: Nonfarm payrolls (November)

USD: Unemployment rate (November)

 

Drop an image here or Supported formats: *.jpg, *.png, *.gif up to 5mb

Error: File type not supported

Drop an image here or

100