Jump to content
Afrii Diaspora Dialogue
  • Rand Report: Rand loses steam amidst risk sell-off

    Rand Report: Rand loses steam amidst risk sell-off

    The South African Rand (ZAR) has lost its forward momentum, after the past few weeks of bullish sentiment. Despite the release of positive South African data, the emerging market currency was unable to shake off the influence of global market factors.

    The most recent US inflation data was the main disruption to the ZAR’s strength. Higher-than-anticipated inflation figures were released, as prices surged by 8.6% in May. The current inflation is rather broad-based, and upwards price pressure is now spilling over from goods into services. This is worrying for the Fed since goods inflation can be reversed by more supply, whereas services inflation may prove to be stickier.

    The markets appear to be pricing in the possibility of a 75-basis-point interest rate hike by the US Federal Reserve. As a result, the US Dollar strengthened against all 19 major currency pairs. The USD/ZAR pair made a substantial move to the upside, appreciating by 1.94%. After opening at R15.60 on Monday and touching a high of R15.92, the pair ended the week at R15.83.

    GBP/ZAR followed a similar, but less pronounced, trajectory. The Pound was well-supported by macroeconomic sentiment, as investors appear to be favouring developed-market currencies. Consequently, the GBP/ZAR pair appreciated by 0.53%. After opening the week’s trade at R19.41, the pair ended on Friday at R19.50.

    image-2.png
    The Rand Report: Image: Supplied

    EUR/ZAR ended the week very flat, as the European Central Bank’s dovish stance on monetary policy proved to be a burden on the Euro. The ECB’s interest rate decision was released on Thursday and as expected, it did not raise rates. However, the ECB has made it extremely clear it will be raising rates by 25 basis points at its next meeting, with a likely hike in the meeting after that as well.

    This week, there will be minimal impactful data from South Africa. The currency will take its cues from global central bank movements, and some additional volatility can be expected.

    The US Fed interest rate decision will be released on Wednesday. Currently, the market is expecting a 50 basis-points hike. However, a further increase to the upside of 75 basis points, would likely lead to additional USD strength. We have already seen a broad-based selloff in risky assets in anticipation of the hike.

    Additionally, the UK interest rate decision will be released on Thursday. The market is pricing in a hike of 25 basis points, which leads to the possibility of disappointment when compared to other central banks. We look to see the forward guidance from BoE Governor, Andrew Bailey, regarding the bank’s projections on growth and future interest rate hike.

    Upcoming Market Events

    Tuesday 14 June

    GBP: Unemployment rate (April)

    GBP: Claimant count change (May)

    US: PPI (May)

    Wednesday 15 June

    US: Interest rate decision

    US: Retail sales (May)

    EUR: Balance of trade (April)

    Thursday 16 June

    GBP: Bank of England interest rate decision

    Friday 17 June

    EUR: Inflation rate (May)


    Get our Daily Rand Report delivered straight to your inbox every weekday to keep on top of everything happening with the ZAR.

    Check out the Sable International Currency Zone to get the latest live exchange rates and easily transfer your money into or out of South Africa.

    View the full article


    Khamisi
     Share

     Share


    User Feedback

    Recommended Comments

    There are no comments to display.



    Guest
    Add a comment...

    ×   Pasted as rich text.   Paste as plain text instead

      Only 75 emoji are allowed.

    ×   Your link has been automatically embedded.   Display as a link instead

    ×   Your previous content has been restored.   Clear editor

    ×   You cannot paste images directly. Upload or insert images from URL.

About

Afrii Diaspora Dialogue

A Platform for Dialogue for the African diaspora

A cultural and community website with a GO.A.L. to UpLift™ and EmPower™ the many different peoples, cultures, and communities of the Black and African diasporas.

Main links

×
×
  • Create New...

Important Information

We have placed cookies on your device to help make this website better. You can adjust your cookie settings, otherwise we'll assume you're okay to continue. Guidelines, Privacy Policy, Terms of Use