South African Rand Firms after SARB Decision
The South African rand strengthened to 14 against the greenback on Thursday, its highest level on a closing basis since May 10th, after the Reserve Bank left interest rates unchanged and revised higher growth forecasts for 2021. At the same time, inflation projections were revised slightly lower. Earlier in the session, the rand was trading lower at 14.1 per USD following a big jump in domestic consumer price inflation and as Federal Reserve policymakers hinted at a possible shift in future policy.
South Africa Leaves Interest Rates on Hold
The South African Reserve Bank unanimously voted to keep its benchmark repo rate unchanged at a record low of 3.5% during its May 2021 meeting, as widely expected. Policymakers said that the overall risks to the growth outlook are assessed to be balanced while overall risks to the inflation outlook appear to be to the upside. Still, Governor Kganyago warned that getting back to pre-pandemic output levels will take time. Meantime, the central bank raised its 2021 growth forecasts to 4.2% from an earlier 3.8% but revised downwards its projections for 2022 to 2.3% (vs previous 2.4%) and 2023 to 2.4% (vs previous 2.5%). Forecasts also point to 4.2% inflation in 2021 (vs prior 4.3%), 4.4% in 2022 (unchanged) and 4.5% in 2023 (unchanged).
Argentine Peso Hits All-time Low
USDARS increased to an all-time high of 94.24
Philadelphia Factory Growth Slows More than Expected
The Philadelphia Fed Manufacturing Index in the US fell to 31.5 in May of 2021 from 50.2 in April which was the strongest reading in nearly 50 years. Figures also came below forecasts of 43. Indicators for new orders (32.5 vs 36) and shipments (21 vs 25.3) declined from April’s readings but remained elevated. Additionally, employment increases were less widespread this month (19.3 vs 30.8), while both price indexes reached long-term highs. Prices paid increased to 76.8 from 69.1 and prices received to 41 from 34.5. Also, most future indexes moderated this month but continue to indicate that the firms expect growth over the next six months.