What we know
Last week we saw the Rand under pressure, with USD/ZAR climbing to 3-month highs to close the week at 16.71, after trading as high as 16.73 earlier in the week.
Oil remained above the $110/barrel level for most of the week, eventually closing at $113/barrel, reviving concerns around heightened global and domestic inflation levels amid South Africa’s rising import bill. That said, the SARB Governor remains confident that current policy settings are sufficient to bring SA’s inflation figure back down to the 3% target once global oil supply shocks fade.
The US Dollar was under the microscope yet again as the US Federal Reserve decided to keep rates unchanged, highlighting the need for further economic trend analysis before determining the future path of interest rates. US Fed Chair Kevin Warsh also emphasised the goal of containing inflation over the long term and stressed the Fed’s focus on economic trends when making decisions, as opposed to reacting to isolated economic data releases.
Europe continues to battle protest action that has placed pressure on the Euro in recent weeks. That said, signals of potential rate hikes in December this year have had some offsetting effects.
The Reserve Bank of New Zealand surprised markets last week by keeping rates unchanged, despite a largely priced-in interest rate hike, which resulted in the NZ Dollar falling sharply against most major currencies. The expectation is now for more aggressive rate hikes to be implemented towards the end of 2026 and into 2027.
On the commodity front, gold closed the week at a 1-year low below the $4000/ounce level after the precious metal experienced a sharp sell-off on Friday afternoon. Macroeconomic pressures in the form of surging oil prices continue to fuel higher-for-longer inflation concerns and the resultant expectations of higher-for-longer interest rates.
What others say
CNBC – New Zealand dollar tanks after central bank defies markets’ near-certainty it would hike rates
“The New Zealand dollar fell sharply on Wednesday, as markets reacted to an unanticipated interest rate decision from the country’s central bank.“
Daily Maverick – Ten critical questions as South Africa heads into high-stakes poll
“With the ANC under intense pressure, the DA seeking gains and smaller parties eyeing roles as kingmakers, voters face a contest that could reshape municipal government.“
EWN – What impact could US midterm elections have on SA?
“US President Donald Trump could face a major political setback in November’s midterm elections, with a Democratic takeover of the House of Representatives increasingly likely as disillusionment grows among American voters.“
Reuters – Bank of England poised to raise rates but may push back on bets for more
“The Bank of England is expected to bow to inflation pressure from soaring energy costs and raise interest rates on Thursday, though it may push back against investors’ bets that several more increases will follow next year.“
What we think
Last week we said that “the Rand traded at the best levels that we have seen in October”.
This week tells a very different story. We find the local currency on the back foot as markets look forward to a data-heavy economic calendar with multiple potential global catalysts, which are likely to introduce high levels of volatility across major currency pairs.
The US midterm elections, the Reserve Bank of Australia’s interest-rate decision, the Bank of England’s policy announcement and Friday’s US non-farm payrolls report are likely to dominate attention.
In the US, political polls suggest the Democrats are likely to take back control of Congress. Adding to this, forecasts for Friday’s US NFP figures expect more than double the number of jobs recorded in the previous release.
The BoE and RBA will also attract a lot of attention, as the expectation is for both central banks to hike interest rates by 25bps. If the Reserve Bank of New Zealand taught us anything, it’s that nothing is ever a “given” in currency markets.
From a domestic perspective, South Africans will make their way to the voting stations on Wednesday as the 2026 local elections commence. Current surveys suggest the ruling party, the ANC, is at risk of losing its majority across multiple municipalities, and this will bring an interesting mix to the local currency if it proves to be true on voting day.
As always, any surprises in the above releases will leave the local currency susceptible to knee-jerk reactions and high levels of volatility.
Our range for the week: R16.35 – R16.90.
Have a great week ahead.
