What we know
With very little driving the market last week, the Rand continued to eke out gains on the back of a weak Dollar. The Dollar Index has remained below 100, finding little support from a strong US employment figure on Friday.
Although the non-farm payroll release on Friday last week was significantly higher than the forecast, the Dollar remained subdued in the last session of the week. The labour market is one of the major drivers that the Fed considers when setting interest rates. We had expected to see a much larger and more sustained reaction to this release rather than a 10-cent move, which unwound almost immediately. Investors seem to place more weight on inflation data for the upcoming rate decision in September.
The probability of a rate hike at the September meeting is currently around 60%, with this week’s inflation data likely to solidify expectations.
What others say
Reuters – Warning signs abound for Trump’s Republicans as midterm campaign begins final sprint
“As the unofficial start of the campaign sprint kicks off on Labor Day Monday, President Donald Trump’s deep unpopularity is imperiling Republican chances of maintaining their narrow majorities in Congress with just two months before November’s midterm elections.“
Moneyweb – World’s biggest money managers are rebuilding gold positions
“Some of the world’s biggest money managers have rebuilt their gold holdings after prices dropped, betting that long-term drivers of the precious metal will endure even as the US Federal Reserve takes a more assertive stance on inflation.“
AXIOS – U.S. attacks 3 Iranian tankers in tit-for-tat response
“U.S. forces struck three Iranian oil tankers Saturday after Iran fired ballistic missiles at two U.S. Navy warships, U.S. Central Command said.“
What we think
Last week we said, “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.”
Although two rate hikes remain likely, the market seems to be leaning more towards one increase for the remainder of 2026. Inflation is the core driver at the moment and the last piece of the puzzle before the rate decision next week.
Our range for the week: R15.90 – R16.20.
Have a great week ahead.
