Good morning,

On the wires…

• US not trustworthy, says Iran negotiator, as Trump demands ‘no nuclear weapons’
• Israel pushes further into Lebanon to ‘deepen and expand our grip’, says Netanyahu
• Woolworths blasts likely meant to intimidate and not kill, says security expert
• Morocco overtakes SA as Africa’s top industrial economy
• Water demand management levy to go up 65% instead of originally announced 12.5%
• Petrol pain on Wednesday, but diesel drops

Quote of the day

“When I was a boy, the Dead Sea was only sick.” — George Burns

The indicators

Currency crackdown…

FXOne would like to thank Magwitch Securities for their valued contribution to the currency comment this morning.

Global events once again played a big role in shaping the economic picture in May.  The ongoing conflict in the Middle East continues to create uncertainty, with little sign of a quick resolution.  While there have been moments of optimism, the situation remains tense, and the disruption to key trade routes has kept pressure on the oil price and global markets.

One of the clearest impacts has been on energy prices.  Rising oil costs have started feeding through into inflation across many economies.  This is not the result of strong demand, but rather supply disruptions, which makes it harder for central banks to manage.  It also creates a more uncertain outlook, as the duration of the conflict is still unclear.

South Africa has felt these effects.  Higher fuel prices have filtered through into the broader economy, putting pressure on transport costs and, in turn, the prices of goods and services.  Consumers and businesses are both starting to feel the strain.

Against this backdrop, the Monetary Policy Committee, of our Reserve Bank, increased the Repo rate during May by 0.25%.  The decision was less about current inflation levels and more about trying to stay ahead of potential future pressures.  The Reserve Bank is clearly focused on keeping inflation expectations under control, even if that means putting additional pressure on already constrained economic growth.

Despite these developments, local financial markets were relatively calm.  The rand and the stock market did not see major moves over the month.  This likely reflects a degree of caution among investors, with many taking a wait-and-see approach as they assess how global events and interest rates may play out in the months ahead.

MARKET INFORMATION

On the political front, the Phala Phala matter returned to the spotlight.  The appointment of an impeachment committee is a significant step and suggests that the issue is far from settled.  While the outcome remains uncertain, the process itself is likely to remain a source of political noise and distraction.

At the municipal level, attention has turned to the City of Johannesburg’s proposed budget. The planned increases in tariffs for basic services have raised concerns, particularly given the already stretched position of many households.  It also brings into focus the ongoing challenges facing municipalities, which seem to be overstaffed and over paid, balancing these factors with the need to fund infrastructure and services with the affordability constraints of residents.

Overall, May highlighted how quickly global events can spill over into the local economy.  A conflict happening far from South Africa is now feeding into higher inflation, rising interest rates, and increased pressure on consumers.

At the same time, the local political and fiscal environment remains complex, with many variables adding another layer of uncertainty.

The result is a fairly delicate balance, with some resilience still evident, but clearly the risks are starting to build.

On the radar…

·      EUR – CPI

·      USD – JOLTS Job Openings

·      USD – Fed Members Speak

·      GBP – BoE Governor Speaks

Did you know?

There are 11 time zones in Russia.