Rand ZAR Analysis:
Fed Committee Revises Expectations on Timing of Interest Rate Hikes
Yesterday, Jerome Powell communicated that there would be no change to the Fed funds rate and that the committee will decide on a meeting-by-meeting basis whether or not to taper its $120 billion per month asset purchase programme.
Powell expressed that labor market data looked strong, apart from those sectors hardest hit by the pandemic, which bodes well for one of the Federal Reserve[3]’s objectives of maximum sustainable employment.
However, the most telling information coming out of the two-day meeting was the Fed dot plot. The dot plot, while not a commitment, presents expectations of when FOMC[4] members foresee the need for potential future interest rate adjustments. The previous version showed only 6 members anticipating a rise in interest rates in 2023 compared to yesterday’s updated version showing that not only had the figure risen to 13, but also that the median FOMC[5] member expected two rate hikes in 2023.
Image: Fed Dot Plot
Source: Refinitiv
USD/ZAR Key Technical Levels
The South African Rand has put in a strong performance against the dollar and other majors like the Euro[6] and the Pound Sterling[7] ever since marking the 2020 high. However, last week looks to have marked a new low for the pair as USD[8]/ZAR continues to rise off the back of a much stronger dollar – the result of yesterday’s FOMC meeting.
A close in the weekly candle above the crucial psychological level[9]
