The rand was firmer on Wednesday, while the JSE gained the most in two weeks as markets attempted a rebound after a shaky start to the week.
As many countries approach election season, political issues are taking centre stage. In the UK, citizens are preparing to cast their votes later this week, while in the US pollsters are analysing the effect of last week’s debate between President Joe Biden and former president Donald Trump on public opinion.
Election-related news swayed markets worldwide this week, “as a potential victory for Donald Trump in the November elections led to higher US treasury yields”, RMB head of forex execution Matete Thulare said.
“Market participants were concerned that Trump’s plans to cut taxes and raise import tariffs would lead to higher inflation and thereby force the Federal Reserve to keep interest rates elevated for longer,” Thulare said.
However, Fed chair Jerome Powell’s remarks about the resumption of the trend of disinflation on Tuesday presented a dovish undertone, which lifted market sentiments, RMB analysts said.
Hopes for rate cuts continued to hold after data on Wednesday showed jobs in the private sector edged lower in June, indicating a potential slowdown in the US labour market.
Earlier this week, US manufacturing weakened more than expected in June, while a different report showed price increases were decelerating.
According to Bloomberg, the data combined could offer more evidence that the Fed wants to see about lessening pressure on inflation before it cuts rates.
The JSE all share rose 1.68% to 80,772 points and the top 40 1.55%.
At 6.05pm, the Dow Jones industrial average was little changed at 39,264 points, while markets were firmer in Europe.
Locally, the rand reversed the previous session’s losses, having lost as much as 1.6% in the previous session amid “signs that the government of national unity (GNU) faces significant obstacles going forward with the two main parties, the ANC and the DA, struggling to find common ground,” TreasuryOne currency strategist Andre Cilliers said.
“The rand firmed [on Wednesday] on the back of a softer dollar and improved risk sentiment in emerging-market currencies, while rate cut hopes in the US got a lift after Powell acknowledged that progress had been made in bringing down inflation,” Cilliers said.
At 6.20pm, the rand had strengthened 0.73% to R18.4603/$ — having gained as much as 1.6% in intraday trade. It had firmed 0.91% to R19.8719/€ and 0.61% to R23.4613/£. The euro was 0.45% firmer at $1.0796.
Despite gains in the rand, Citadel Global director Bianca Botes cautioned that the local currency “continues to take strain, along with other emerging-market currencies, amid risk repositioning across the board”.
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