Rand rallies after South Africa sets new 3% inflation target

The South African rand strengthened on Wednesday after Finance Minister Enoch Godongwana announced a lower inflation target during the Medium-Term Budget Policy Statement, a move investors had long anticipated and which has helped fuel a rally in local assets this year. Minister Godongwana said the target would immediately shift to 3%, with a one percentage point tolerance band on either side, replacing the previous range of 3–6%. At 13h25 GMT, the rand traded at 17.0650 against the US dollar, up 0.50% from Tuesday’s closing level.

On Wall Street, markets showed a mixed performance as the Dow Jones Industrial Average surged more than 400 points to a new record high, driven by optimism that the US government shutdown could soon end. Lawmakers returned to Washington to vote on a deal aimed at restoring funding to federal agencies after the shutdown that began on 1 October. The index outperformed as major financial stocks, including Goldman Sachs, JPMorgan, and American Express, also reached record highs. Meanwhile, the S&P 500 and Nasdaq slipped slightly, as gains in semiconductor and financial stocks were offset by declines in technology shares.

In London, the FTSE 100 ended marginally higher on Wednesday, setting a new record but lagging other major European indices due to weakness in oil and gas shares. Political uncertainty weighed on sentiment following reports that Health Secretary Wes Streeting was seeking to replace Prime Minister Keir Starmer - claims he strongly denied, calling the speculation “self-destructive”. Energy stocks declined sharply, with BP down 1.60% and Shell off 0.70%, following a more than 3% fall in WTI crude prices.

European equities closed at record highs on Wednesday, with the STOXX 50 up 1.10% and the STOXX 600 rising 0.70%, amid optimism over an imminent reopening of the US government and growing expectations of additional Federal Reserve rate cuts. Traders also continued to monitor corporate earnings updates. Shares in Infineon Technologies gained 2.20% after the company forecast a return to revenue growth in the 2026 financial year. RWE rose 3.50% after reporting higher-than-expected profits for the first nine months of the year, while Bayer climbed 1.70% following better-than-expected earnings.

In Asia, Japan’s Nikkei 225 Index advanced 0.43% to close at 51 063, while the broader Topix Index rose 1.14% to 3 359 on Wednesday, the latter hitting fresh record highs as signs that the prolonged US government shutdown could soon end boosted global sentiment. Meanwhile, China’s Shanghai Composite slipped 0.07% to close at 4 000, and the Shenzhen Component fell 0.36% to 13 241, extending losses from the previous session as investors awaited key Chinese economic data for insight into growth momentum.

In commodities, WTI crude oil futures fell more than 3% to around a three-week low of $59.10 per barrel on Wednesday, following three consecutive sessions of gains, after OPEC revised its outlook to show a supply surplus in the third quarter. Gold traded around $4 130 per ounce, hovering near a two-week high, supported by rising expectations of an imminent Federal Reserve rate cut.