Rand firm as markets focus on Fed

The JSE was firmer on Wednesday, while its global peers were mixed as investors focused on the conclusion of the Federal Reserve’s monetary policy meeting.

Markets, which were expecting policymakers to keep interest rates unchanged when it concluded its twoday federal open market committee (FOMC) on Wednesday evening, were not disappointed.

The Fed kept interest rates unchanged, while confirming that it would continue to seek confirmation that inflation was moving closer to its 2% target. Nine of the Fed’s 19 policymakers still see three quarter-point rate cuts this year, while nine see two or fewer. Only one pencilled in more cuts than the median, compared with five in December.

Earlier on Wednesday, TreasuryONE currency strategist Andre Cilliers said: “Markets are expecting the Fed to keep rates on hold but will watch Fed Chair Jerome Powell’s press statement after the meeting for clues as to when the Fed will start cutting rates.”

“Traders are concerned the Fed could be less dovish in its outlook, and therefore will be paying close attention to the quarterly update ... after the interest rate announcement.”

The JSE all share gained 0.77% to 72.419 points and the top 40 0.8%. Precious metals rose 3.35%, resources 2.1% and retailers 1.43%. Anglo-American Platinum led the gains in the precious metals sector, rising 7.49% to R733.90.

At 5.50pm, the Dow Jones industrial average was 0.25% firmer at 39,127 points, while markets were mixed in Europe.

Locally, headline consumer inflation rose 5.6% year on year in February, from 5.3% increase in January — above the consensus of 5.5% increase. Monthly headline inflation was 1%.

Core inflation, which strips away volatile food and oil prices, rose 5% year on year, from 4.6% previously.

“Headline inflation has ticked higher once again, getting closer to the Reserve Bank’s 3% to 6% range ceiling. The news doesn’t bode well for expectations of rate cuts ... for the first half of 2024,” said IG senior market analyst Shaun Murison. “The rand’s reaction to the CPI print was to strengthen off the day ’ s worst levels, on the prospect of higher for longer rates domestically.”

“This initial move will be tested though, as we lead into this evening’s Fed’s rates decision and policy statement. While no change is expected today from the world’s largest economy, markets continue to look for clues as to when we could see US rates start to ease,” said Murison.

At 5.45pm, the rand had strengthened 0.56% to R18.8028/$, 0.67% to R20.4071/€ and 0.52% to R23.8967/£. The euro was 0.11% weaker at $1.0853.