In this week’s market review, TreasuryONE’s André Cilliers and ETM Analytics’ Ilze-Mari le Roux discuss the US election outcome, with Donald Trump set to take office, and its implications for the US dollar, inflation, and the South African Rand. Contrary to expectations of a prolonged vote count, the result was confirmed swiftly, allowing markets to shift focus back to the economic landscape.
Key upcoming data includes US Consumer Price Index (CPI) figures, with inflation expected to continue its moderating trend for now. However, Trump’s anticipated tariffs could reintroduce inflationary pressures once he assumes office, potentially challenging the Federal Reserve’s rate-cutting momentum.
Last week, the Fed cut interest rates by 25 basis points, in line with market expectations. Although the cut was uneventful, Fed Chair Jerome Powell indicated that rising US debt levels remain concerning. Powell suggested that the Fed will take a cautious approach in future rate decisions, especially given Trump’s pro-growth policies, which favour low rates. Powell’s statements signal resistance to aggressive rate cuts, despite anticipated pressure from the incoming administration.
Locally, the Rand has shown resilience despite dollar strength following the election. The Rand remains well-positioned against major currencies, including the Euro and the Pound, supported by favourable domestic factors, including stable governance and positive sentiment. TreasuryONE expects the Rand to trade comfortably within the 17 to 18 range against the dollar. Looking ahead, South Africa’s monetary policy decision looms, with expectations of a potential interest rate cut between 25 and 50 basis points. TreasuryONE advises close monitoring of global economic developments, as both domestic and international factors will influence the Rand’s path into year-end.