After last week’s flurry of economic data releases, this week is comparatively quiet, with no major announcements expected.
Turning to the South African economy, the USD/ZAR has risen above R18, currently trading at R18.05, its highest level in a month. Despite this move, short-term ZAR interest rate swaps remain anchored at the lower end of the curve, with the 2-year swap at 7.0785% and the 3-year at 7.1150%.
Dissecting the 2-year segment via the FRA curve, the market continues to price in a cumulative 35 basis point cut over the next 15 months. However, global uncertainty, particularly in the US could weigh on the likelihood of rate cuts in South Africa. The FED has once again held rates steady at 4.25%–4.50%, a level unchanged since President Trump took office in January. The last Fed rate cut was in December 2024, when it reduced the benchmark rate by 25 bps. With US rates remaining elevated and inflation risks still present, the narrowing interest rate differential may further reduce the Rand’s resilience and limit South Africa’s ability to ease policy.