What we know
The Rand performed remarkably well last week, reaching levels that seemed out of reach even just a few weeks ago. USD.ZAR spent much of last week hovering around or just below the 16.00 round figure.
On Friday, the revision of US employment figures opened the door for some volatility as the preliminary downward revision of -97,000 was well below the previous 5-year average of -347,800, which provided some support to the Dollar, leading to the Rand weakening 20 cents to end the week.
To explore this impact a bit further, the monthly employment figures published in the US are based on a monthly survey allowing a short turnaround before releasing the data. As this is based on a sample, this figure needs to be reviewed against hard data. This process is more time-consuming and so this revision was for the 12-month period ending March 2026.
The market tends to react sharply to these revisions even with the time delay as this provides insight into how the economy is truly performing, which in turn affects labour market expectations as well as forecasts for future interest rate decisions.
As market participants look for signals ahead of the next interest rate decision, a stronger-than-expected labour market proves supportive of the Dollar in the short term, as it allows the Fed to remain focused on controlling inflation through interest rates.
Fed Chair Kevin Warsh noted at the annual Jackson Hole Symposium last week that raising interest rates may still be on the cards should inflation not cool sufficiently. Warsh emphasised the point that controlling inflation remains their number one objective in contrast to calls from the White House for a decreasing interest rate environment. Although he cautioned that extensive forward guidance should not be expected, the market seems to have still interpreted his remarks around inflation as forward guidance and is now pricing in a 66% chance of a rate hike at the September meeting, a probability that rose from only 40% last week.
What others say
Reuters – Iran’s president says Tehran will reciprocate if US honours interim deal commitments
“Iran will immediately reciprocate if the United States returns to its commitments under an interim deal signed in June, President Masoud Pezeshkian said on Tuesday.“
Moneyweb – Cape Town seals first agreements to buy power at below Eskom rates
“The City of Cape Town has made further strides in reducing its energy dependence on Eskom, entering into two 20-year power agreements to buy 70MW of power at a lower price than Eskom tariffs.“
What we think
Last week we said, “markets will turn their attention towards the annual Jackson Hole central banking symposium, where guidance from the Federal Reserve could provide the next major catalyst for interest-rate expectations and the dollar.”
All signs seem to point to higher interest rates, but we will also keep a close eye on the employment figures from the US this Friday. In the light of soft NFP figures for the last two months, this release will signal whether the jobs market is also a thorn in the Fed’s side or whether they can remain focused on curbing inflation. With a forecast of only 58,000, a strong figure could cement expectations for two more rate hikes this year while another underwhelming figure could take the second increase off the table completely.
In the absence of other major economic releases this week, we expect range-bound trading until Friday with possible disruption due to the ongoing conflict between the US and Iran.
Our range for the week: R16.00 to R16.35.
Have a great week ahead.
