Tue. Jan 28th, 2020

The Rand rallies ahead of interest rate decision

The ZAR has had an unprecedented amount of strength in the last week, rallying to a five-month high against the Pound and a three-month high against the Dollar.

the rand rallies ahead of interest rate decision 1024x683 - The Rand rallies ahead of interest rate decision

This Rand report is brought to you by Sable International

The Rand is currently hovering at R17.37 to
the Pound. The rate has broken all expectations and was rejected by its attempt
to break through R14 against the Dollar. It is currently trading at R13.887,
but the upcoming interest rate decision could have a different result in the
week ahead.

The South African Reserve Bank (SARB) will make a crucial decision on Thursday that could make or break the currency’s current short-term strength against major markets. The expectation is that the interest rate will be cut from 6.75% to 6.5%. This dovish view from the SARB is expected due to the slowdown of the economy during the first three months of the year. This outcome will more than likely weaken the Rand against the major currencies.

472a73e4 2019 07 16 the rand report - The Rand rallies ahead of interest rate decision

In the UK, the Pound is in a seasonal dip
and has hit a two-year low against the Dollar this month amidst the Brexit
turmoil. The Sterling has weakened 6% in the last two months against the Euro. On
Monday, hostile Brexit talks were held between chief negotiators as the
European Union calculates concessions it can offer the UK to prevent a no-deal

The general outlook of Brexit is still one of uncertainty and confusion as the race for Prime Minister continues until 22 July. If Boris Johnson takes control, he has vowed to “deliver Brexit” by the end of October. It seems like Johnson has it in the bag, but nothing is for certain until we see the final ballot.

Market event calendar

16 July

  • UK Average Earnings Excluding
    Bonus (3MO/Yr) (May): This is a key short-term indicator of economic growth and
    is expected to increase.

Wednesday 17 July

  • UK Consumer Price Index (YOY) (June): Measures price movement and purchasing trends. It is expected to increase.

Thursday 18 July

  • South African SARB interest rate decision: Expected to decrease.

Friday 19 July

  • US Michigan Consumer Sentiment Index: Indication of consumer confidence and economic activity. Expected to increase slightly.

Andre Pheiffer

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