South African Rand Slips as Fed Keeps Rates, Oil Rises
The South African rand slipped against the US dollar, the euro, and the British pound on Thursday as oil prices spiked, while the US Federal Reserve kept rates unchanged.
The rand is at R16.89 to the US dollar, R19.69 to the euro, and R22.74 to the pound, with its movement largely influenced by investor caution following the US Fed’s hawkish pause, which has rippled across emerging-market currencies, First National Bank (FNB) said in a morning brief.
In a report, Fitch said between 27 February and 24 April, the largest depreciations against the US dollar among the Fitch-20 countries were in South Africa (3.8%), India (3.3%), Indonesia (2.7%) and Korea (2.6%). Brazil and Russia saw their currencies appreciate significantly.
Gold is quoted at $4 566.33 per ounce, primarily driven by a dramatic slump in ETF demand as highlighted by the recent World Gold Council report, while key monetary policy decisions remain a risk to the appeal for the non-yielding yellow metal.
Brent crude climbed to $113.80 per barrel, its highest level since 2022, after reports that the US military planned to brief President Donald Trump on possible action against Iran, fueling concerns that the conflict could intensify.
The US Federal Reserve (Fed) maintained its benchmark interest rate at 3.50% to 3.75% on Wednesday, in what was the most divided decision since 1992.
While most committee members favoured a hold, four officials dissented: three preferred removing the commitment to future rate cuts entirely due to persistent inflation, while Stephen Miran broke ranks to advocate for an immediate cut.
Fed Chair Jerome Powell, in what may be his final meeting as such, noted that while the labour market remains solid, elevated energy prices from the Middle East conflict have made the inflation path uncertain, requiring a cautious, data-dependent approach.
Eyes now travel across the Atlantic, where the European Central Bank (ECB) is widely expected to follow suit and keep its deposit facility rate at 2% today, despite a complex backdrop of surging costs and cooling demand.
Markets are navigating a “hawkish hold” narrative, with rising oil prices pushing headline inflation expectations to 2.9% for April. However, this inflationary pressure is colliding with a sharp drop in consumer and business sentiment, as Eurozone growth projections for 2026 are being revised downward towards 0.9% due to the impact of the Iran war on real incomes.
For reference, the Eurozone economic sentiment indicator (ESI) dropped more than consensus expectations had feared to 93 points in April (96.2 in March), the lowest level since 2020.
The current developments underscore a broader theme of “policy friction” in a stagflationary environment. While the Fed is managing internal dissent over the timing of future cuts, the ECB faces a “June cliff,” with markets now pricing in at least two 0.25 percentage point (ppt) hikes by year-end to prevent second-round price effects from becoming embedded.
Today’s central bank meeting could yield a dual outcome: any signal that inflation risks are being dismissed as transitory could trigger a steepening yield curve, while a surprise hike would likely be interpreted as a policy error given the fragility of the Eurozone consumer. Oil Rises as Trump Says Iran Blockade Could Last ‘Months’