As expected the SARB’s Monetary Policy Committee cut rates by 25 basis points yesterday although the MPC was split on the decision with 3 members voting for a cut and 2 members against. Reserve Bank governor Letsetja Kganyago highlighted the subdued inflation outlook and revised the bank’s GDP forecast for 2020 to -7.3% from -7.0%.
The Rand, which had weakened quite sharply to 16.6800 levels before the rate decision, stabilised back to around 16.5800 before closing at 16.6523. This morning the Rand is trading weaker still at 16.7120 as risk appetite declines due to the escalation in the US-China spat. The Chinese have ordered the closure of the US consulate in Chengdu in a retaliatory move, and this has seen EM markets being sold off and Asian stock markets falling. The VIX volatility index is 7.24 % higher as market players become uneasy.
The Dollar remains weak against the major currencies with the Euro at 1.1601, the Pound at 1.2730, and the Yen at 106.50 as markets await news of the next US stimulus package. US jobless claims rose above forecasts yesterday which is further hurting the Dollar.
Wall Street had a poor day with the S&P down 1.23%, the Nasdaq down 2.29%, and the Dow down 1.31%. The Hang Seng and Shanghai have lost 2.27% and 2.83 % respectively this morning, while the Nikkei remains closed due to a public holiday. US futures are pointing to further losses as they trade around 0.50% weaker this morning. The JSE closed 0.42% stronger at 56,071 in the wake of the interest rate cut and strong Gold price.
Gold hit a $1 897.91 high yesterday before consolidating at the $1 884.00 level. Currently, we are trading at $1 883.80. Oil is steady this morning with WTI at $41.15 and Brent crude at $43.46.
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