Rand steady ahead of inflation data and Reserve Bank decision

South African financial markets opened the week focused on Wednesday's consumer inflation data and the Reserve Bank's monetary policy decision, with the rand trading around R16.26 to the dollar, R18.62 to the euro and R21.74 to the pound, according to Investec market data.

The Reserve Bank's Monetary Policy Committee, which held its repo rate at 7% in July on a four-two split in favour of a hold, meets again on Wednesday against a backdrop of a shrinking economy and persistent inflation.

Gross domestic product contracted by 0.2% in the second quarter, Stats SA said, driven by declines in manufacturing, mining and trade, after 0.4% growth in the first quarter, while unemployment rose to 33.6% and the current account swung to a deficit equivalent to 2.6% of GDP.

Inflation eased to 4.3% in July from 5% in June, with the August figure due alongside the rate decision.

Some indicators have held up better: retail sales rose 3.4% year on year in July, insolvencies fell 15.4% over the same period, and Eskom reported its energy availability factor at 67.96% – its best in six years – alongside 490 consecutive days without load-shedding.

Global markets rallied on Monday, with the S&P 500 up 1.5%, the Nasdaq up 2.3% to a record close and the Dow up 0.7%, led by technology and semiconductor shares, as a lower US Treasury yield and easing oil prices lifted sentiment; European markets followed with their strongest one-day gain since July.

Brent crude was trading around $101.48 a barrel on Tuesday, up about 1.1%, on renewed uncertainty over the Middle East, while gold held near $4,347 an ounce. The JSE All Share Index was up 0.10% at 113,111, with financials and property shares outperforming and resources shares down 0.94%.

Elsewhere in the region, Botswana's inflation eased to 9.3% in August, Zimbabwe's fell to 2.9%, and Eswatini's economy grew 6.1% year on year in the first quarter, while Namibia and Mozambique continued to face weaker growth and fiscal pressure respectively.