South African Rand Steady Against USD, EUR, GBP Ahead of PMI
South African rand (ZAR) is trading steady against crosses on Wednesday as oil prices continue to ease in the global commodity market ahead of the purchasing manager index (PMI) report to be released by S&P Global.
The local currency rand is stable, trading at R16.24 to the US dollar (USD) on Wednesday, R18.89 to the euro (EUR), and R21.87 to the British pound (GBP), First National Bank (FNB) said in its morning brief.
A sustained decline in oil prices boosted optimism, enhancing demand for the rand versus the US dollar, Euro and British pound. The energy crisis put pressure on the consumer price index in April, and inflation accelerated faster to 4%.
In response to the surge in inflation, the South African Reserve Bank hiked rates by 25 basis points to anchor inflation and signalled additional monetary policy tightening if Middle East unrest persists.
Despite the setback, the US and Iran continue their diplomatic talks to achieve the reopening of the Strait of Hormuz; President Donald Trump gave the assurance.
The local unit strengthened against its major crosses on Tuesday, driven by falling oil prices amid optimism over a US-Iran peace deal, First National Bank said.
The bank sees this as a direct positive for South Africa’s import bill, coupled with the South African Reserve Bank’s recent rate hike, which also supported the currency by reinforcing its inflation-fighting credibility amid the broader Emerging Market tightening wave.
The yellow metal is facing mounting headwinds this morning, pressured by strong fresh US jobs data, which reinforced expectations that the US Federal Reserve may keep rates higher for longer to combat still-elevated inflation.
Investors now look ahead to Friday’s non-farm payrolls report for further clues on the Federal Reserve’s monetary policy stance. This morning, gold is trading at $4 480/ounce.
Oil prices are relatively stable, having pulled back from recent highs but remaining in an elevated position compared to pre-Middle East war
Sentiment continues to be driven by uncertainty around peace talks, as the lack of a breakthrough has increased concerns about global crude supply. This morning, Brent crude oil is trading at $97.04/barrel.
