Bottom Line:
- Central banks remain in tightening mode, although it is important to note that the pace of tightening has slowed. In the coming months, the Fed is likely to reach for the pause button and at most, the market will accept one last 25bp rate hike. Much will depend on the resilience of the economic data scheduled in the next two months. Some soft readings will only heighten the probability that the Fed will reach for the pause button earlier than they have guided.
- The other two major central banks are lagging the Fed and have at least another one or two rate hikes left. However, a lot is priced in, so the conservatism of the SARB has stood the ZAR in good stead and helped it remain resilient, although it should be added that the ZAR has been amongst the worst performing EM currencies. It might’ve been a lot worse if the SARB had not kept pace with the rate hikes.