In the markets: Watch to watch this week

Reserve Bank decisions

The timing of this week’s interest rate decision by the South African Reserve Bank (SARB) is important as it comes after the surprise victory of Rebublican presidential candidate Donald Trump,  which shook markets.

An overall review of the monetary economics of South Africa is surely what is needed to provide a bit of stability in the market – that, and some forward guidance from Reserve Bank governor Lesetja Kganyago during his speech on Wednesday.

In September the SARB decided to keep its interest rate unchanged, a decision that was widely expected as policymakers said the inflation outlook improved as it returned to the target range of betweeen 3% and 6%.

However, growth remained subdued as domestic fixed investment and low business and consumer confidence persisted.

As a result the SARB said the improvement was unlikely to be sustained and more interest rate hikes may be required in the first quarter of 2017.

The latest inflation data for October will be released the day before the interest rate decision and is expected to tick just above the inflation-rate target.

September data indicated that the cost of transportation went up at a faster-than-expected pace, which pushed the inflation rate to 6.1%, above the 3% to 6% target range. October’s inflation rate is expected to be the same.

Other SA market indicators

Business confidence index data will be announced on Friday and will be closely watched, as this was also mentioned by Kganyago in his September speech.

Optimism among South African entrepreneurs jumped to 42 in the third quarter of 2016 from 32 in the previous quarter.

Interestingly, this week’s data will be of notable importance as it comes after the recent municipal elections, but before the onset of the political uncertainty connected to the future of finance minister Pravin Gordhan.

Other important economic announcements due this week include:

Monday

• Japan Balance of Trade
• Euro Area European Central Bank president Mario Draghi speaks

Tuesday

• Euro Area Consumer Confidence
• US Existing Home Sales

Wednesday

• German Markit Manufacturing PMI Flash
• US Federal Open Market Committee Meeting Minutes

Thursday

• South African Producer Price Index (PPI)
• German Ifo Business Climate and GfK Consumer Confidence

Friday

• Japan Inflation Rate
• Great Britain Second Estimate GDP
• US Durable Goods Orders

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