Rand continues to weaken after SARB rates meeting
The South African Reserve Bank (SARB) has kept lending rates unchanged at the conclusion of its Monetary Policy Committee (MPC) meeting.
Rand weakens further after SARB MPC meeting
The South African Reserve Bank (SARB) has kept lending rates unchanged at the conclusion of its Monetary Policy Committee (MPC) meeting. The decision was in line with consensus estimates and leaves the repo rate at 3.5% and the prime lending rate at 7%.
The central bank’s Quarterly Projection Model (QPM) has however suggested that rates could increase by 25 basis points (0.25%) in both the second and fourth quarters.
The lower inflation realized has in part been an influence in the SARB guiding that a rate hike previously expected in the third quarter could now be moved to the fourth quarter. This is perhaps reason for a further weakening of the ZAR over the meeting.
In terms of forecasts the SARB has guided the following:
- Headline CPI (Consumer Price Index) expected at 4.3% in 2021, 4.4% in 2022 and 4.5% in 2023
- Core CPI expected at 3.3% in 2021, 4% in 2022 and 4.3% in 2023
- GDP (Gross Domestic Product) growth of 3.8% expected in 2021, 2.4% in 2022 and 2.5% in 2023
The USD/ZAR
The USD/ZAR has now broken above the 14.90 level as global risk aversion and a slightly more dovish SARB weighs on the domestic currency.
The move above 14.90 is accompanied by the stochastic crossing out of oversold territory, supporting the move. 15.20 becomes the initial target from the move. Traders who are long might consider trailing a stoploss on a close below the previous day’s low.
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