Rand edges up to 16.4475 as South Africa braces for Godongwana's budget and a jump in inflation
Nedbank expects September headline inflation to climb to 4.8% from 4.4% in August, with fuel and the weaker rand named as the main pressure points.
The rand opened the week at 16.4475 against the dollar on Monday, about 0.2% stronger than its previous close, as traders positioned themselves for a Wednesday that carries two events at once: Finance Minister Enoch Godongwana’s medium-term budget policy statement and Statistics South Africa’s release of September consumer inflation and retail sales figures.
As the Sunday World reported on 19 October, the market is watching the budget statement for fresh signals on the country’s fiscal trajectory, with expectations of an improving budget balance and a more favourable sovereign ratings outlook. The rand’s early gain was measured at 0548 GMT.
The medium-term budget policy statement is the Treasury’s update on how the government’s spending plans and revenue projections are tracking between the main February budget and the next one. For households it is the document that sets the tone for what the state believes it can afford, and for lenders it is the clearest signal of whether South Africa’s debt path is stabilising. That is why the currency moves on the expectation of it before a single number is read out.
On the same day, Statistics South Africa will publish consumer inflation and retail sales numbers. Nedbank economists expect headline inflation to accelerate to 4.8% in September from 4.4% in August, and annual retail sales growth to slow to 2.5% in August from 3.4% in July.
The bank attributes the inflation pickup mainly to transport costs, citing rising fuel prices and rand depreciation. Middle East conflict has kept fuel costs elevated, which South African motorists and commuters meet at the pump and in taxi fares long before they show up in an official inflation figure.
A rand that is slightly stronger on the day does not undo the depreciation that has already fed through into import and fuel costs, and Nedbank’s forecast reflects that lag rather than Monday’s move.
On the bond market, South Africa’s benchmark 2035 government bond was little changed in early deals, with the yield rising half a basis point to 8.7%.
