What we know
It seems that we are in for more of the same as we approach the three-month mark since the US’s first attacks on Iran at the end of February. Both sides are back at the table with renewed negotiations, which seem to bring a new round of positivity and a deal that seems closer than ever.
At the time of writing, the Rand is trading at 16.33 to the Dollar, benefiting from improved risk sentiment globally. However, the Rand has performed remarkably well thus far throughout the conflict. Apart from the original reaction in March, as conflict reached its peak, the Rand has remained below the 17.00 round figure for the better part of the last three months.
Last week, South Africa received an adjustment in its credit rating outlook, being upgraded to “positive”. This signals that the country is moving in the right direction, although this rating does not move debt back to investment grade. Fiscal discipline would need to be maintained alongside improved growth to continue to decrease the debt burden.
What others say
AXIOS – What’s inside the Iran deal Trump is close to signing
“The deal would avoid an escalation of the war and decrease the pressure on the global oil supply. However, it’s unclear whether it will lead to a lasting peace agreement that also addresses President Trump’s nuclear demands.“
Business Tech – Interest rate heartbreak for South Africa
“Unfortunately for South African consumers, the fuel price shocks following the United States’ war in Iran have pushed the energy component of inflation far higher.“
Visual Capitalist – The $126T Global Economy in One Giant Chart
“The global economy is expected to reach $126 trillion in 2026, but that output is highly concentrated.“
What we think
Last week we said that, “From a local perspective, markets will also continue watching SARB expectations closely, particularly as imported inflation risks begin creeping higher through elevated energy prices.”
This week, the SARB will face a tough decision at the Monetary Policy Committee meeting on Thursday.
As an energy importer, the oil shocks have caused a deviation from the SARB’s 3% target, with inflation now near the edge of the 1% tolerance band. Forecasts suggest that the MPC may decide to increase the repo rate by 25 basis points, but do so at the risk of curbing an already fragile growth rate. Should rates remain unchanged, they may end up chasing their tails when it comes to curbing inflation.
Our range for the week: R16.10 to R16.50.
Have a great week ahead.
