Rand Gains Amid Inflation Low and Fed Cut...

Key Moments (8-12 December 2025)

✂️ Fed Cuts 25bp to 3.50-3.75%: Third consecutive cut since September – but 3 dissenters signal divided committee

📉 Dollar Dumps to 8-Week Low: DXY fell to 98.35 on Thursday as Fed's hawkish tone spooked bulls

📊 SA Inflation Expectations Record Low: BER survey shows 2-year expectations at 3.7% – lowest since data began

💼 US Jobless Claims Spike: Initial claims jumped 44,000 to 236,000 – biggest weekly rise since March 2020

Weekly Statistics

• Open to Close Move: The week opened at R16.93/$ Monday morning and closed Friday afternoon at R16.86/$ – a 6.6c (0.39%) strengthening.

• Average Daily Range: ~13.4c (0.8%) Risk per $1 Million Exposure: R134,000

• Maximum Single-Day Move: ~16.7c (1.0%) on Thursday Risk per $1 Million Exposure: R167,000

• Weekly Range: 31.4c (R16.80 low to R17.12 high) – 1.9% swing Risk per $1 Million Exposure: R314,000

Full Newsletter

📉 Rand Gains Amid Inflation Low and Fed Cut...

SA inflation expectations hit a record low. The Fed cut rates. And the Rand quietly gained for a second straight week... It was a tale of two halves this week...

...with the Rand drifting weaker early on before surging after the Fed's Wednesday decision.

The Fed cut rates – but it was what happened inside that meeting that caught markets off guard. And back home, SA delivered a surprise of its own on Friday that could shape SARB policy heading into 2026.

The result? A second consecutive week of Rand strength.

Let's dig into how it all played out...

Key Moments (8-12 December 2025)

These were some of the major headlines and events over the past five days:

✂️ Fed Cuts 25bp to 3.50-3.75%: Third consecutive cut since September – but 3 dissenters signal divided committee

📉 Dollar Dumps to 8-Week Low: DXY fell to 98.35 on Thursday as Fed's hawkish tone spooked bulls

📊 SA Inflation Expectations Record Low: BER survey shows 2-year expectations at 3.7% – lowest since data began

💼 US Jobless Claims Spike: Initial claims jumped 44,000 to 236,000 – biggest weekly rise since March 2020

Monday opened at R16.93/$ and saw early weakness push the pair up to test R17.00, as markets positioned ahead of Wednesday's Fed decision.

There wasn't much on the local calendar to kick off the week, but investor appetite for SA assets was evident as the National Treasury's R11.8 billion infrastructure bond sale attracted strong demand...

...a follow-up to last week's 4x oversubscribed $3.5 billion Eurobond. Global investors clearly aren't spooked by coalition politics (at least not yet).

The Rand drifted through the afternoon session, testing R17.06 before settling. We closed at R17.03/$ – a 10 cent weakening on the day, but nothing dramatic.

Tuesday opened at R17.03/$ and pushed weaker in early trade...

...testing R17.12 by mid-morning – the week's worst level.

The pre-Fed jitters were palpable. With markets pricing an 89% probability of a 25bp cut, the question wasn't whether they'd cut – but what they'd signal about 2026.

Hawks worried about inflation stickiness, while doves pointed to cooling labour markets.

The uncertainty kept the Rand on the back foot, but it managed to recover slightly through the afternoon as some profit-taking kicked in, closing at R17.05/$ – just 2 cents weaker on the day...

...the real action was coming tomorrow.

Wednesday: Fed Day Delivers

Wednesday opened at R17.05/$ and initially held steady...

...with markets in wait-and-see mode ahead of the evening's Fed announcement.

The decision landed at 21:00 SA time: a 25bp cut to 3.50-3.75%, as expected.

But the details were anything but routine, with three FOMC members dissenting (one wanting more, and two wanting no change at all)...

...the most divided committee in recent memory!

And Powell's message? "We can be more cautious as we consider further adjustments."

The dollar tanked, as traders digested the reality:

Seven officials are now projecting NO cuts in 2026. The dot plot showed just one cut next year, down from the four markets had priced in.

The Rand took full advantage as it surged 12 cents, closing at R16.93/$ – the biggest daily move of the week.

And in other news...

Dollar at 8-Week Lows

The greenback's troubles extended beyond the Fed...

...with the DXY hitting 98.35 on Thursday – its lowest level since mid-October.

That's the third consecutive weekly drop for the dollar index. The combination of Fed rate cuts, Treasury purchases, and persistent trade deficits is weighing on sentiment. For EM currencies like the Rand, dollar weakness is a tailwind – and it's showing.

US Labour Data Confusion

Thursday's jobless claims added to the data chaos...

...with initial claims jumping 44,000 to 236,000 – the biggest weekly spike since March 2020!

But context matters.

The prior week saw claims at 191,000 – a 3-year low that was likely distorted by the holiday. Continuing claims actually fell 99,000 to 1.84 million – the biggest drop in four years. The Fed, already flying blind without October CPI data (cancelled due to the government shutdown), now has conflicting labour signals to navigate.

Gold Pushes Above $4,300

Gold touched $4,341/oz this past week – testing October's record highs. Of interest, in our inaugural copy of the Market Demystifyer we gave our outlook for Gold, which may be contrary to what mainstream analysts are saying!

Thursday opened at R16.93/$ and pushed stronger from the start...

...as dollar weakness from the Fed decision carried through.

The DXY hit 8-week lows in Asian trade, and the Rand followed suit. By mid-morning we'd punched through R16.85, testing levels not seen since February 2023.

Local data added to the positive mood: mining production jumped 5.8% YoY in October, while manufacturing beat expectations at +0.2% (versus -1.7% forecast).

The afternoon brought a fresh test of R16.80...

...our week low and just 10 cents off nearly 3-year best levels.

We closed at R16.82/$ – a solid 10 cent gain on the day, marking two consecutive sessions of Rand strength.

Friday opened at R16.82/$ and saw a mild pullback in early trade...

...testing R16.90 as some profit-taking kicked in after Thursday's surge.

But the big news landed mid-morning: the BER's inflation expectations survey. Two-year expectations fell to 3.7% – a record low since the survey began in 2020. That's well below the SARB's new 3% midpoint target and suggests households and businesses believe inflation is under control.

Why does this matter?

The SARB watches these numbers closely...

...and this gives them room to cut further at the 29 January MPC meeting.

The Rand gave back some gains through the afternoon (a bit of weekend risk-off), closing at R16.86/$ – still a 4 cent pullback on the day but well within the week's strengthening trend.

Volatility & Risk Analysis

Here's how the volatility played out:

• Open to Close Move: The week opened at R16.93/$ Monday morning and closed Friday afternoon at R16.86/$ – a 6.6c (0.39%) strengthening.

• Average Daily Range: ~13.4c (0.8%) Risk per $1 Million Exposure: R134,000

• Maximum Single-Day Move: ~16.7c (1.0%) on Thursday Risk per $1 Million Exposure: R167,000

• Weekly Range: 31.4c (R16.80 low to R17.12 high) – 1.9% swing Risk per $1 Million Exposure: R314,000

For importers, levels below R17 remain attractive – we're still near 3-year highs for the Rand. For exporters, the question is whether this strength holds into year-end or whether profit-taking kicks in as liquidity thins.

The Week Ahead (15-19 December 2025)

SA: November CPI (17 Dec), SARB Quarterly Bulletin (15 Dec), Leading Indicator

US: November Retail Sales (17 Dec), Housing Starts, Industrial Production, Fed speakers

EU: ECB Rate Decision (18 Dec – expected 25bp cut), EU CPI Final

What to Watch: SA's November CPI on Tuesday will be closely watched after this week's record-low expectations data. The ECB meets Thursday with markets pricing another 25bp cut. And with year-end approaching, liquidity will thin out – expect choppy conditions as traders square up positions.

UNDERSTANDING WHAT MOVES MARKETS

This past week is again a timely reminder that negative news does not always mean Rand weakness...

...in fact, this was exactly the opposite where there was plenty of negativity coming from across the Atlantic with some significant repercussions, yet the Rand just shrugged it off.

Bottomline: The trigger is never the whole story...

...direction comes from understanding the underlying forces.