Last week, global financial markets focused on the easing in trade tensions between the US and China, while locally South Africa’s exit off the greylist.
International Market Developments
Friday afternoon saw the release of the closely watched US CPI inflation figures, with September recording a 3.0% y/y outcome for both CPI inflation and core CPI inflation, both lower than the consensus expectations of 3.1% y/y.
For core CPI inflation (which excludes food and energy), the reading fell, from 3.1% y/y in August to the September outcome of 3.0% y/y, while headline CPI inflation rose from 2.9% y/y in August. The CPI data was released despite the US government shutdown because September CPI inflation is used to calculate the annual cost-of-living adjustment (COLA) for social security payments.
Trade tensions between the US and China appeared to ease over the weekend, with negotiations having led to a ‘framework’ for a trade deal. This comes ahead of a planned meeting between President Trump and President Xi on Thursday (30 Oct). US and Chinese trade negotiators said they have reached agreement on several contentious issues, paving the way for Presidents Trump and Xi Jinping to finalise a deal between the two countries.
Several central banks see rate decisions this week. The ECB and the Bank of Japan are not expected to cut, but the US and SA remain in interest rate cutting cycles. Markets have only priced in one further interest rate cut for South Africa this year, suggesting that a cut in the repo rate is more likely to take place at the November MPC meeting.
Local Market Developments
As expected, South Africa exited the FATF ‘greylist’ as on Friday, providing some strength to the rand. The FATF noted that South Africa will no longer be subject to its increased monitoring process, having completed its action plan on time.
Among the improvements cited were a sustained increase in investigations and prosecutions of money laundering and terrorist financing activities.