In the markets: What to watch this week

SA

On Thursday, the South African Reserve Bank (SARB) Monetary Policy Committee (MPC) will likely keep the interest rate at 7%, with inflation data to show steady improvements a day earlier.

However, SARB is expected to increase interest rates by 0.25% when considering the effects of a US interest rate hike and a sovereign debt ratings downgrade in December weighing on the rand and the economy. Consumer inflation, meanwhile, is expected to slow to 5.8% in 2017 from 6%.

Forecasts for growth in the South African economy are 0.3% expansion, an uptick from 0.2% prior to the most recent GDP figures that showed economic growth of 3.3%, higher than the 2.3% figure expected. Growth for 2017 is expected to accelerate to 1.1% annually.

SARB governor Lesetja Kganyago said at the time: “With relatively good second-quarter figures released on Tuesday, the MPC will be able to revise up its annual estimates at the September meeting, but the annual figure will remain low.”

The rand has stabilised this year from its weakest point of R17.78 to the dollar as the central bank hiked interest rates from 6% at the end of last year to 7% at present. The rand gained over 8% this year.

The US

Market bets about the chances of an interest rate hike by the Fed has swayed markets in recent months.

Although it remains unlikely that the Fed will hike rates this week, economists and Federal Fund Futures are placing a higher than 50/50 chance that the Fed will move in December.

Market participants will keenly await Janet Yellen’s speech to gauge the probability of a hike at the end of the year, but with the recent rhetoric investors seem pretty confident about it.

Other important economic announcements this week:

Monday

• CN House Price Index
• EA Current Account and Construction Output

Tuesday

• DE PPI
• US Housing Stats

Wednesday

• JP Interest Rate Decision
• EA ECB Non-Monetary Policy Meeting

Thursday

• CBI Industrial Orders
• US Initial Jobless Claims & Existing Home Sales
• EA Consumer Confidence

Friday

• DE GfK Consumer Confidence and Markit Manufacturing PMI Flash
• US Markit Manufacturing PMI

Giacomo Bonavera is head of foreign exchange trading at Capilis Asset Managers. Click here to visit the firm’s website.