Locally hopes are high that the rand will continue its steady climb

Wealth

Hopefully the rand will continue with a steady climb

Locally, hopes are high that the rand will continue its steady climb. Economists believe this could open the door to a 25 basis points rate cut. 

The President of the Republic of South Africa, Mr Cyril Ramaphosa, delivered the first State of the Nation address of the 6th democratic Parliament on Thursday. Local markets took the speech in their stride and followed international markets higher. 

South Africa’s annual inflation accelerated in May, with the rate reaching the midpoint of the SA Reserve Bank’s target range. Higher food and beverage prices contributed to the increase. Annual consumer-price growth accelerated to 4.5% from a year earlier, compared to 4.4% in April. Core inflation remained around the 4.1% mark. The inflation rate has been stable for two years, well in the target band of 3% to 6%. Although the Monetary Policy Committee (MPC) of the Reserve Bank seeks to anchor inflation expectations at 4.5%, indications are that a decrease in interest rates may follow.

The JSE all-share index closed 1.36% higher for the week. Financial shares led the charge with a gain of 3.79%. Financials performed well on the back of a strengthening currency, with the rand gaining 3.26% against the USD to trade at around R14.32.

Global markets had a positive week. Prospects are high for a US Federal Reserve rate cut at the Fed’s July meeting, while hopes are equally high that the US and China will re-engage in trade talks at next week’s G20 summit. These positive expectations pushed the S&P 500 to a record high on Thursday, despite escalating tension in the Middle East. The US blames Iran for recent attacks on ships in the region, while in the past week Iran shot down an unmanned military drone in what the US says was international airspace. The tension in the Middle East placed pressure on the oil price and the price of Brent crude climbed by 4% to $64.53 per barrel.

As mentioned earlier, global markets performed well on the back of renewed optimism out of the US. The S&P closed 2.20% higher, the CAC gained 2.99%, and the Dax closed 2.05% higher.

Boris Johnson and Jeremy Hunt are the finalists for the leadership of the United Kingdom’s Conservative Party. They will be facing their 160 000 party members in a campaign that will culminate in a mail vote, the results of which are due on 22 July. The FTSE 100 in London closed 0.84% higher.

Locally, hopes are high that the rand will continue its steady climb. Economists believe this could open the door to a 25 basis points rate cut. Although such an interest cut may not make a massive difference to consumers, it will bring some relief. 


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