U.S Interest Rate Decision and the South African market
The U.S. Federal Reserve's Federal Open Market Committee (FOMC) will announce whether the interest rates in the U.S. will decrease or remain unchanged on Wednesday at 20:00 SAST.
- The Federal Funds rate is probably the most watched and popular interest rate in the United States as it affects monetary and financial conditions.
U.S Market Outlook:
The FED’s outlook might be to wait for more confirmation of an economic downturn but there is a 20% chance that they might cut interest rates later tonight. The probability of a rate cut has increased significantly for the July sitting and no action is expected for the June decision later tonight. If we do get an upset and rates are cut, then we can expect the U.S Dollar to lose strength. This in turn would be positive for the major U.S Indices which might just push higher but as always there is no guarantee.
Impact on South Africa:
If there is a rate cut later tonight the Dollar (USD) might lose momentum that might relieve some pressure on the Rand (ZAR) in the short term. The local economy has more pressing concerns currently as the rating agency Moody’s has recently seen the first quarter drop in GDP as a credit negative for the government and local banks. The President has also stated that youth unemployment is a national crisis as unemployment rose to over 27%.
A strengthening Rand (ZAR) might just give us some investment opportunities in the short term on the following instruments:
What can I Invest in today? (South African instruments)
ETFs tracking the major U.S Indices might be our best bet
ETFs or ETNs tracking Gold
Bank stocks
Retail stocks
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