Rand rattled by US rate hikes

The rand jumped to R13.44 per dollar on Wednesday night after US Federal Reserve chairman Jerome Powell’s interest rate announcement, but calmed back to R13.28 per dollar by 6:30am on Thursday morning.

The US central bank raised its interest rate from 1.75% to 2% as expected, but Powell’s commentary included bad news for emerging market currencies in that he is likely to announce two further 25 basis point increases in 2018.

Attention now shifts to the European Central Bank (ECB) which is scheduled to announce its interest rate decision at about 2pm.

ECB president Mario Draghi is expected announce the central bank’s interest rate remains at zero, but he may announce an end to the central bank’s €30bn per month bond purchase programme.

The rand was trading at R15.68 per euro and R15.68 per pound.

Thursday is a quiet day on the JSE results front, but a busy day for economic data, with many more pieces to the second quarter GDP puzzle appearing following Wednesday’s April retail sales shocker.

Annual retail sales growth for April was only 0.5% versus the 4.5% expected by economists, showing consumers suffered far more from the hike in VAT and fuel taxes than anticipated.

Statistics SA is scheduled to April’s wholesale trade figures at 10am, mining production and sales at 11:30am, and motor trade sales 1pm.

The economists’ consensus on Trading Economics is the decline in SA’s mining production will slow to 5% from March’s 8.4%.

Investec Bank economist Lara Hodes is more optimistic that the consensus, forecasting it will return to growth at about 0.6%.

“Hopefully the new mining charter will be finalised soon and stimulate increased private sector confidence, with Mineral Resources Minister Gwede Mantashe stating that ‘(w)e aim to finalise and gazette the Mining Charter in June’,” Hodes wrote in her weekly note e-mailed on Friday.

“This should decrease policy uncertainty that has been weighing on the sector, allowing it to attract much needed investment and take full advantage of the recovery in global commodity prices.”