The JSE was little changed on Wednesday and the rand held steady below R18 to the dollar after better-than-expected consumer inflation data, while investors focused on the outcome of the Reserve Bank’s monetary policy committee meeting on Thursday.
The consumer price index declined to an annual 5.4% in June from 6.3% in May, taking inflation into the Bank’s 3%-6% target range for the first time in 13 months. The consensus forecast of economists surveyed by Reuters was 5.6%.
Annual core inflation slowed to 5% from 5.2% a month earlier, also below the market forecast of 5.1%.
The data supports the view that the Bank may keep interest rates unchanged on Thursday, but the market is divided between a pause and a 25 basis-point (bps) increase.
“The further decline in headline inflation supports the view that the SARB might keep the repo rate steady ... However, a 25 bps increase is also possible,” said PSG Wealth CIO Adriaan Pask.
At 5.58pm, the rand had weakened 0.45% to R17.9245/$ and 0.13% to R20.0669/€, but it had strengthened 0.49% to R23.1182/£. The euro was 0.29% weaker at $1.1195.
“The rand’s appreciation against the dollar, from [near] R20/$ in June to below R18/$ this month, is positive for the SARB’s inflation forecast, and so for its monetary policy decisions,” said Investec chief economist Annabel Bishop.
“We expect that CPI inflation will average near 5.7% this year if the rand does not see sudden, severe weakness, which is more likely on an adverse geopolitical event, given the improving US inflation environment that is expected to continue.”
Globally, inflation and the interest-rate outlook in the US continue to be the dominant theme ahead the Federal Reserve’s policy meeting next week. Notwithstanding softer inflation data recently, the Federal Open Market Committee is widely seen hiking rates by 25 bps thanks to a relatively strong labour market and services sector.
The JSE all share and the top 40 were little changed, with the former ending the session less than 0.1% lower at 77,080.97 points. SA listed property gained 0.5%, food producers 0.32% and industrials 0.27%, while industrial metals lost 1.06%, resources 0.54%, and precious metals 0.39%.
At 6.10pm, the Dow Jones industrial average was 0.29% firmer at 35,052.62 points, while in Europe the FTSE 100 gained 1.8% and France’s CAC 40 0.11%, but Germany’s DAX lost 0.1%
Gold eased 0.3% to $1,972.40/oz and platinum 1.12% to $973.19/oz. Brent crude was 0.26% firmer at $79.99 a barrel.
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