The rand retained positive sentiment as budget optimism carried through to Friday’s session to counter dollar strength as rate hike bets rose after last week’s above-expectations inflation print, according to Oxford Economics Africa.
US Fed funds futures are now pricing in nearly three full rate hikes priced in by the end of next year, up from two at the start of the week. Strong demand and constrained supply will drive inflation higher in early 2022, which could lead the Fed to raise rates earlier than our December 2022 forecast. If inflation continues to outstrip expectations, the Fed might also accelerate its QE tapering, but for now, we foresee consistent tapering through mid-2022.
At the close of local trade on Friday, the rand ended at R15.30/$, after trading in a range of R15.23/$ - R15.37/$. The rand traded flat overnight. The expected range of the rand against the dollar today is R15.20/$ - R15.50/$.
South African bourse
The JSE All Share (+1.14 percent) ended higher on Friday as investors remained optimistic following the medium-term budget policy statement revealed on Thursday. The local bourse was boosted by gains in Technology (+4.36 percent) and Industrials (+3.37 percent), offsetting losses recorded in the Telecommunication (-1.89 percent) and Financials (-1.13 percent) indices.
On Friday, luxury goods group Richemont’s (+10.08 percent) share price soared on the news that its interim results came out better than expected. In the overall emerging market sphere, the MSCI Emerging Market Index (+0.32 percent) traded firmer.
Brent crude oil
The Brent oil price traded lower for most of Friday as the US dollar strengthened, with investors expecting the Fed to increase interest rates sooner in order to stem the uptick in inflation. By the close of local trade on Friday, the Brent oil price stood at $82.26/pb. Crude prices traded lower during Asian trade this morning.
BUSINESS REPORT ONLINE