Investors look to US inflation data

The rand gained the most in a week on Monday, while the JSE tracked firmer US and European markets, with investors’ focus shifting to key inflation reports this week.

The local currency gained more than 1.2% in intraday trading, having lost as much as 1% in the previous session after stronger-than-expected US nonfarm payrolls surprised the market. The country’s labour market added 528,000 jobs in July, beating a market estimate of 258,000.

Sentiment remains cautious as a strong US jobs report means there is a very strong chance for the Fed to implement another 75 basis point (bps) rate hike in September, said RMB market research analysts in a note.

“Technically, the USD/ZAR is being squeezed between a rising support line around R16.60 and topside resistance around R16.85, with momentum indicators suggesting short-term downside momentum is lacking, with further consolidation on the cards,” said RMB analysts.

At 5.56pm, the rand had strengthened 0.87% to R16.6318/$, having reached an intraday best of R16.5676/$. It firmed 0.61% to R16.9806/€ and 0.53% to R20.1161/£. The euro was 0.26% firmer at $1.0207.

CLARITY

On Wednesday, focus will turn to US consumer inflation numbers for July. In June, US inflation accelerated to 9.1% year on year, which was hotter than expected.

A new reading for the consumer price index (CPI) will give investors more clarity about the central bank’s next move at its policy meeting in September. Traders are now pricing in a higher likelihood of a 75bps hike next month, which would be the third straight increase of that magnitude.

“Wednesday’s US CPI report could provide further market volatility. Until the release, we expect the market to remain volatile on account of the monetary policy tightening being priced in right now,” said RMB analysts.

The JSE all share gained 1.07% to 70,266 points, lifted by gains in precious metals and resources, up 4.58% and 1.57%, respectively. The retailers index also showed a strong performance, adding 2.06%. The top 40 gained 1.04%.

AngloGold Ashanti led gains in the precious metals sector, rising the most since March, up 6.68% to R263.28. Northam Platinum added 6.4% to end at R184.02.

At 6.05pm, the Dow Jones industrial average was 0.39% firmer at 32,929 points, while in Europe, London’s FTSE 100 gained 0.57%, France’s CAC 40 0.8% and Germany’s DAX 0.84%.