US inflation
The inflation in the US was released, and now the question is will the Fed continue to hike interest rates? Headline inflation came out at 5% which is below the expected 5.2% in March. However, the Fed is keeping a firm eye on core inflation and services inflation. Looking at the graph one can see this remains stubbornly sticky. The market is still largely pricing in a 25bps hike at the May FOMC meeting. This will be the last inflation data print before the meeting.
Rand reaction
The local currency started the day off on the back foot and this is where it will end the day as well, firmly on the backfoot. After the release of the inflation data the rand quickly retraced some lost ground to R18.25 but after digesting the print all of the gains reversed again, to trade back at R18.40. The pressure on the rand does not look to subside anytime soon and a test of the high of the year around R18.70 certainly looks possible in the short term.
