Week Ahead: Mining and manufacturing updates for December will provide guidance on the sectors’ contributions to Q4.17 GDP

01 Feb 2018

Annabel Bishop

Chief Economist

Figure 1: SA Monetary Policy Committee (MPC) meeting dates for 2018

Currency outlook for the week ahead and foreign portfolio flows:

Figure 2: Purchasing price parity value of the rand
Compared to last week’s close the rand broadly consolidated over the course of this week at around 11.98/USD.Looking ahead, the rand is likely to remain sensitive to political developments. These would include the outcome of the ANC NEC meeting scheduled this weekend and the State of the Nation Address next week (8th February).
The USD has remained under pressure despite a more hawkish Fed FOMC statement this week. In particular the Fed signalled further interest rate increases citing that “economic conditions will evolve in a manner that will warrant further gradual increases in federal funds rates”. Moreover, the Fed expects inflation “8to move up this year and to stabilise” around the 2% goal. The Fed statement also cemented expectations of an interest rate increase in March, with the implied probability of a March rate hike rising to 99% from 90% prior to Wednesday’s FOMC statement. Overall, the market is factoring in two to three more 25bp rate hikes this year – similar to the guidance provided by the Fed.
In the week ahead, the rand is expected to trade in a range of R11.50/USD – R12.50/USD, R14.50/EUR - R15.50/EURand R16.50/GBP - R17.50/GBP.
Figure 3: Purchasing price parity value of the rand

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