Will they cut interest rates in their November policy meeting, and if they do, will it be a 25bps cut or a 50bps cut?? You’d be forgiven for assuming I’m talking about the FED but after yesterday’s local inflation report this question refers to the SARB!!!
These are the mid rates at 5:50 today:
Brent Crude = $75.89 per barrel
- After putting up an admirable fight for a few days the Rand finally caved yesterday as we fell from R17.54 at the open to R17.87 as the day’s worst level. Dollar strength continues to dominate proceedings while there’s also a new wrinkle in the Ukraine / Russia war which could add further support to the greenback.?
- Locally we only had yesterday’s consumer inflation report to focus on this week and the good news is that it surprised to the downside in a big way.? Until recently the majority of the forecasts out there called for CPI to remain unchanged at 4.4% in September but over the last few days those forecasts were revised lower to 4.1% which would have been great news given the implications this would have on the SARB’s policy moves.? Things got even better for SA’s indebted consumers when CPI came in even lower at 3.8% yesterday and all of a sudden there’s chatter about November holding an outsized 50bps cut.?
- The following is from Business Day and suggests that a larger rate cut could be in the offing:? Inflation slowed in September for the fourth month running, reaching its lowest level since March 2021 as fuel prices continued to fall, paving the way for another interest rate cut in November. Old Mutual chief economist Johann Els said that made a 50bps interest rate cut in November more likely.?With a relatively stable Rand and no underlying price pressures in the economy, Els said the Bank was expected to cut its rate by a further 50bps. “In my opinion, the Reserve Bank is behind the curve, they should have started the cutting cycle in July and cut by 50bps in September,” he told Business Day.
- On the international front the Dollar Index continued its relentless march higher thanks mainly to surging US Treasury yields with their 10year note touching 4.26% yesterday which is its highest level since July.? US yields have moved steadily higher as the market reprices the likelihood of the FED cutting rates at a slower pace than was originally thought after their initial 50bps cut in September, and with higher yields comes a stronger Dollar at the expense of the Rand and all other currencies.?
- US economic strength is casting doubt on the FED’s rate cutting trajectory with the chances of a Trump victory contributing to these doubts, both of which have been Dollar positive for a while now, but yesterday a new headline entered the fray.? The US announced that it has seen evidence that North Korea has sent 3 000 troops to Russia for possible deployment into the Ukraine offensive with South Korea saying this will be increased to 10?000 in the coming weeks.? This has brought that war back onto the geopolitical radar which alongside heightened tensions in the Middle East could well provide support to the Dollar as a safe haven asset.?
- No local market data today.?
- Possible USD mid rate trading ranges in the Rand today are R17.65 and R17.95.
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