What we know
Last week the Rand was again under pressure as the Dollar continued to strengthen leading to ZAR losses for four weeks in a row. Non-farm payrolls had a muted immediate effect but contributed to a shift in expectations going forward.
A strong GDP figure last week from the US pushed the Dollar stronger, with the Dollar Index (DXY) firmly settling above the 100 level and climbing to around 102 by the end of the week, showing that the Rand was not the only currency on the back foot against the Dollar.
US non-farm payrolls is always a figure to pay close attention to, but this week a softer-than-expected release had a mild 5-cent impact for a high-volatility data point. Inflation and the labour market are key points that the Fed considers when setting interest rates. Following this release, market expectations seem to have shifted away from two rate hikes for the remainder of 2026, favouring only one increase, likely closer to the end of the year.
What others say
Daily Maverick – Why we could not avoid petrol pump prices shooting up above R30 per litre
“It’s just bad news all round with the pedal firmly on the metal for a further acceleration in inflation against the backdrop of a sluggish and slowing domestic economy.“
Zero Hedge – Why Are Yields Rising?
“Interest rates ended the month significantly higher. The primary driver is a repricing of Fed policy. Not long ago, the market was expecting two rate cuts for 2026; now it is expecting three hikes.“
Politico – France’s debt troubles stir memories of the euro crisis
“Stress in financial markets has now started to spread beyond its borders, raising fears that political dysfunction in France could cause a broader, regional problem.“
What we think
Last week we said, “Any evidence of higher inflation will be matched with expectations of future reserve bank tightening”.
With the PCE inflation figure well within expectations at 0.2%, the market seems to expect that the Fed will loosen the reins going into the end of the year compared to the previous projection.
This week we look forward to commentary from the Fed relating to the September meeting. Despite the fact that Warsh steers away from explicit forward guidance, the market will be looking for signals regarding the Fed’s stance around interest rates and the job market.
This week we look forward to commentary from the Fed relating to the September meeting. Despite the fact that Warsh steers away from explicit forward guidance, the market will be looking for signals regarding the Fed’s stance around interest rates and the job market.
Our range for the week: R16.40 – R16.80.
Have a great week ahead.
