Senior Analyst, Rand Swiss

Shaun is a senior analyst specialising in derivatives trading and technical analysis across index, commodity, FX, and equity markets. With nearly 20 years of experience in financial markets, Shaun brings deep expertise to his role, presenting research and analysis to Rand Swiss clients. Shaun is a regular commentator on local and global financial markets, contributing to major media outlets including CNBC Africa, Reuters, Moneyweb, and Business Day. He produces daily and weekly market reports focused on technical analysis and trading opportunities in his core markets. As a registered person at the JSE and a Certified Financial Technician (CFTE), Shaun combines formal credentials with practical market expertise.

You can follow Shaun on Twitter at @ShaunMurison_RS for regular market updates and trading insights.

South African inflation and rand strengthen as SARB prepares rate cuts in 2026

South Africa’s inflation trajectory continues to narrow as December 2025 consumer price data arrives in line with market consensus, reinforcing expectations for ongoing monetary policy easing through 2026. The rand has responded positively to improved price pressures and forward guidance from the South African Reserve Bank.

December inflation reads align with consensus expectations

December 2025 inflation arrived at 3.6% year on year, meeting consensus forecasts. The monthly reading of 0.1% reinforces benign price momentum, while core inflation stands at 3.3% year on year, indicating persistent disinflationary pressures across the broader economy. This alignment validates recent monetary policy decisions and signals that price pressures remain contained relative to historical patterns.

Softer oil prices have contributed meaningfully to the improved inflation picture, reducing imported goods costs and supporting the disinflationary narrative. With global energy prices remaining moderate, imported inflation pressures could remain subdued through the first quarter of 2026.

SARB Governor signals inflation will stabilise around 3% target

South African Reserve Bank Governor Lesetja Kganyago has signalled confidence that inflation will stabilise around the central bank’s newly adopted 3% target this year. His forward guidance indicates monthly inflation prints should maintain a “3% handle” throughout 2026, with the annual average anticipated around 3.5% before the rate converges toward the 3% target by 2027.

The SARB’s commitment to the lower inflation target reflects confidence in policy transmission and underlying disinflationary forces. Kganyago emphasised that future rate cuts depend on the inflation outlook, indicating room to ease policy as price pressures remain subdued.

Rate cut expectations firm for January 29 and beyond

Markets have priced substantial conviction for a 25-basis point rate cut on January 29, with consensus expecting the repo rate to fall to 6.50%.

The case for additional cuts appears robust. Inflation remaining approximately one percentage point below historical forecasts, combined with softer oil prices and a strengthening rand, creates conditions that justify continued policy accommodation. Markets expect the gradual easing cycle to proceed through the first half of 2026, contingent on inflation maintaining current levels. Should disinflationary momentum persist, the SARB may deliver additional quarter-point reductions, though policymakers will likely adopt a cautious approach to avoid excessive currency weakness or demand-driven price pressures.

Rand strengthens on improved inflation and real yield support

The rand has responded positively to improved inflation dynamics and rate cut expectations, supported by strong commodity (metal) pricing. The combination of softer oil prices and currency appreciation creates a virtuous cycle reinforcing disinflation momentum, as rand strength reduces the rand-denominated value of imported goods.

The rand’s appreciation reflects broader emerging market sentiment toward South African assets, particularly as the SARB’s easing cycle combines with contained inflation to offer compelling real yields. Foreign investors seeking exposure to emerging market currencies with policy support have positioned accordingly, supporting rand stability through early 2026.

Risks to rand strength warrant monitoring

Despite improved fundamentals, several downside risks could constrain rand appreciation through 2026. Global risk-off sentiment, a spike in energy prices and capital flight from emerging markets remain primary concerns should geopolitical tensions escalate.

Current conditions present an attractive window for offshore positioning

With your annual R1-million SDA allowance now fully reset, current rand strength presents an early-year window to move funds offshore. While the currency may remain relatively stable near term, current exchange rates offer significantly improved conversion terms that are not guaranteed to persist. Tax implications and personal circumstances must guide any decision, and professional advice aligned with individual objectives remains essential.

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