In this week’s market update, TreasuryONE’s Wichard Cilliers and currency strategist André Ciliiers discuss the potential impacts of the upcoming U.S. election on global markets, particularly focusing on the South African Rand. As polls suggest an increasing likelihood of a Trump victory, the uncertainty surrounding the outcome, including foreign policy and trade stances, is expected to drive volatility in emerging markets. In such uncertain scenarios, the U.S. dollar often strengthens as investors seek safe assets, potentially affecting the Rand.
The team also considers the economic situation in Europe, where recent interest rate cuts signal the European Union’s efforts to counter slow growth. In contrast, the U.S. Federal Reserve remains in a more comfortable position, with the economy relatively stable. Markets currently anticipate the Fed will cut rates by 25 basis points in the next meeting, though further cuts will likely depend on economic data and developments from the election.
On the local front, South African inflation data this week is expected to show a dip below 4%, opening the door for potential interest rate cuts by the South African Reserve Bank (SARB). While there is scope for a 50 basis point cut, the SARB is likely to adopt a more conservative 25 basis point reduction, especially if Rand volatility increases due to U.S. election outcomes.
For the Rand, the 17 to 18 range remains a stable trading zone, though short-term volatility could provide opportunities for both importers and exporters. Positive domestic factors, including low oil prices, strong trade terms, and stable government bonds, continue to support the Rand. TreasuryONE advises monitoring the U.S. election closely, as the outcome will have significant implications for global financial markets and currency movements.