Weekly economic wrap: rand back under R19/$ again

It was a quiet week for the economy on the domestic front, with the rand moving back to under R19/$ while the world waits to see what happens after Donald Trump is sworn in as president of the United States (US) on Monday.

Lisette IJssel de Schepper, chief economist at the Bureau for Economic Research (BER), says while there was little domestic data, global market participants zoomed in on US inflation data after the release of the solid US jobs report.

She points out that despite the rhetoric of late last week, Donald Trump’s economics team once again signalled that tariffs would be less extreme than promised during Trump’s campaign.

“Bloomberg News reported that the team was looking for a way to roll out high(er) tariffs with maximum impact to boost negotiating leverage, but that will cause minimal damage to avoid a spike in inflation.

“One such way is to follow a stepped approach. After the news reports, equity futures rose (later followed by rising stock prices when markets opened), the US dollar weakened and Treasury yields declined.

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Did the US dollar weakening rescue the rand?

“The dollar was particularly strong before the news broke, trading at a two-year high against major currencies following a boost from the solid jobs data last week Friday. Trump himself has not commented on this message and may, like he did last week, flip markets around by denying such an approach.”

Meanwhile, she says, the lower-than-expected US core inflation print pushed the dollar somewhat weaker still and contributed to US treasuries having their best day in months, with yields moving lower across the board.

Most importantly, the depreciating dollar helped the rand, which strengthened to about R18.80/$, although the average for January so far is still about 60c weaker against the dollar compared to December.

Bianca Botes, director at Citadel Global says the rand traded at R18.71/$ on Friday afternoon, recovering slightly from its weakest level in nine months. “The currency faced pressure from a strong dollar and uncertainties surrounding US monetary policy under Trump’s administration.”

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Opening weeks of 2025 not smooth sailing, rand battling

Although the week was quiet on the economic front, she says the opening weeks of 2025 were anything but smooth sailing, with financial markets stumbling through a potential minefield of economic data points around inflation in the US, underlined by uncertainty about the actual shape of the incoming Trump administration’s economic plans.

“With Donald Trump back in the White House, a sense of unpredictability permeates the global economic stage. Tariffs, rising inflation and interest rates have taken the spotlight, leaving asset prices to dance erratically to a discordant symphony of geopolitics and monetary policy.”

Isaac Matshego and Busisiwe Nkonki, economists at the Nedbank Group Economic Unit, say the rand has pulled back from R19.09/$ in late trading on Friday last week after falling sharply in the aftermath of the strong US labour market data, which bolstered market expectations that the Federal Reserve would delay more interest rate cuts.

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Inflation continues to loom large with Trump administration starting

Botes also points out that inflation continues to loom large. “The Trump administration’s renewed push for protectionist tariffs on imports from major trading partners promises to amplify costs for consumers and businesses alike. Paired with aggressive fiscal measures, including infrastructure spending and corporate tax breaks, the ingredients for sustained inflation are firmly in place.”

In addition, the US Federal Reserve remains resolute in response, signalling its readiness to hold the line with elevated interest rates, Botes says. “Their goal is to stave off inflationary flare-ups. Investors now anticipate a prolonged period of higher prices, albeit less dramatic than the inflation spikes of 2022.”

Geopolitical turbulence is also adding fuel to the fire, she says. “US trade negotiations with China are on thin ice, with a retaliatory tariff war gaining traction. Energy markets, meanwhile, are grappling with volatility as sanctions and regional conflicts disrupt oil supply chains.

“What was once a predictable commodity landscape has become a battleground of uncertainty, sending ripples through equity and fixed-income markets.”

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Oil prices retreat from five-month high, gold rallies again

Brent crude oil prices fell below $81/barrel on Thursday, retreating from a five-month-high, Botes says. “Markets responded to US sanctions on Russian crude and speculation that Trump might ease these restrictions after his inauguration.

“China and India reportedly increased purchases from Saudi Arabia to offset supply disruptions. Meanwhile, oil tankers remained stalled off China’s coast as traders navigated new sanctions. Trump’s administration is reportedly exploring strategies that could benefit Russian oil companies and facilitate Ukraine peace talks.”

This week gold prices rallied, reaching $2,715/ounce, a two-month-high, on the back of weaker-than-expected US data. Easing CPI data in the US and similar rate cut expectations in the UK and Eurozone are further supporting bullion, she says.