What we know
In a week where US inflation reinforced expectations of another rate hike before year-end, the Rand managed to squeeze out a second consecutive week of gains against the Dollar, closing below 16.50.
US inflation came in above the forecasts, and the key takeaway is that there is not sufficient cooling to warrant holding rates constant through 2026. Month-on-month we saw an uptick of 20 basis points, attributed to the increase in fuel costs as the US conflict with Iran continues. Core inflation, which excludes volatile items such as fuel and food, also increased, highlighting the broader economic effects of the fuel price shock.
The Dollar remained strong last week and currently trades close to its best level against the Euro in five months. The Euro is under pressure amid slower growth prospects and political uncertainty in member countries. France faces fiscal pressures and analysts doubt whether the proposed budget could rectify the issue, while Spain faces a snap election at the end of November. Coupled with the escalating tensions throughout the Eurozone as groups protest against the cost of living, housing and education, the Euro is taking strain.
What others say
News24 – What SpaceX and Anthropic IPOs mean for passive investors
“SpaceX’s 12 June listing at US$1.77 trillion was the largest IPO on record, but Anthropic’s prospectus reportedly targets about US$2 trillion, so the record may not last long.“
Business Day – OPINION | SA banks are ill-prepared for El Niño
“For South Africa El Niño means hotter, drier summers, more heatwaves, floods, pressure on water supplies and greater strain on farmers, the writer says, but it will also have severe financial implications for banks.“
Reuters – IMF members call for more support amid war shocks, ‘advanced intelligence’ risk
“IMF members call for more support amid war shocks, ‘advanced intelligence’ risk.“
Daily Maverick – AI cannot predict SA’s 2026 elections outcome, but it may influence November 4 polls
“Artificial intelligence cannot predict the outcome of South Africa’s next local government elections on 4 November 2026. But that does not mean people will not ask it to or allow its answers to shape how they see the contest.“
What we think
Last week we said that “higher oil prices will continue to feed into domestic inflation figures, potentially complicating the SARB’s policy decisions in the short to medium term. The SARB’s September outlook highlighted these risks, with headline inflation expected to rise above 5% later this year, far above the 3% target, and economic growth projected at 1.2% for 2026.”
As oil remains elevated well above the $100/barrel level, policymakers are faced with the challenge of either providing price relief to stimulate the economy without putting too much of a dent in the fiscus, or allowing the situation to play out and managing the effects. The oil price briefly tested the $110/barrel level on Friday, and a break through this level would be worrying for markets as the conflict remains front of mind.
Turning our focus to political drivers, the markets are looking towards clues around the South African municipal and US midterm elections. Trump is in the hot seat as these elections reflect how voters perceive the president’s actions, and they have the power to change who controls the House of Representatives and the Senate. Locally, the elections affect the control of municipalities, directly influencing service delivery and infrastructure. Thus far the biggest shift seems to be in Johannesburg, where the DA currently leads based on polling data as Zille aims to take over from the ANC.
In the week ahead we expect UK inflation and unemployment figures in terms of international news. Locally, we also look forward to inflation data, but more importantly the mid-term budget statement, which could provide insight into the thinking around inflation and the fuel price.
Our range for the week: R16.30 – R16.60.
Have a great week ahead.
