14 Jul 2017

Week Ahead: SARB to keep repo rate unchanged at 7.0% but likely to adopt a more dovish policy stance

Annabel Bishop

Chief Economist

The broad gains in emerging market currencies this week were partially supported by the market interpretation of a less hawkish Fed, following Fed Chair Yellen’s testimony to Congress.

Week Ahead Figure 1

Yellen noted that “with inflation continuing to run below the Committee's 2 percent longer-run objective, the FOMC (…) intends to carefully monitor actual and expected progress toward our symmetric inflation goal.” The testimony signaled a gradual pace of policy normalisation. Indeed, today’s release of US CPI for June disappointed expectations, with core CPI decelerating to 1.7% y/y, the lowest since January 2015.  The rand appreciated by over 2% since Monday to 13.03/USD presently, realising the second best weekly spot returns out of 24 emerging market currencies. 

The rand is expected to trade in a range of R13.55/USD – R12.55/USD, R15.40/EUR - R14.40/EUR and R17.45/GBP - R16.45/GBP.  

Week Ahead Figure 2

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