Much Stronger Oil Price Lifts Dollar Especially Against Rand Following Surprise Interest Rate Decision by South African Reserve Bank
July 23, 2026
The price of West Texas Intermediate crude oil catapulted around 5% higher overnight and is presently a bit above $91.0 per barrel.The price had fallen previously as low as $68.58 on the first day of this month. Iran and U.S. forces traded shots for a twelfth straight day, but today’s big development in that war is that Houthis in Yemen fired on Saudi oil tankers in the Red Sea. If that shipping channel as well as the Strait of Hormuz both shut down, there’s no telling how high the price of oil might go.
By comparison to the cost of oil, the dollar’s appreciation remains mostly orderly, with 0.3% overnight advances against the euro, Swissy, and sterling. Larger advances have been made of 0.4% verus the Mexican peso, 0.5% relative to the peso and kiwi, and 0.6% vis-a-vis the Australian dollar, but the biggest move of the day has been a 1.8% jump relative to the South African rand, following surprise news that officials at the South African Reserve Bank had failed to lift their policy interest rate further. Coming into this week, market participants were anticipating an increase of 25 basis points in follow-up to an initial 25-bp hike at the previous review in May. Two of the bank’s six policymakers in fact voted to do such a move. After news yesterday of a larger-than-expected rise in South African consumer price inflation to a 2-year high of 5.0% in June from 4.5% in May and 3.0% in February, speculation emerged that the rate might be increased by 50 basis points today.
In defense of the decision to instead leave the SARB interest rate unchanged at 7.0%, the four-person majority concedes upside risks surrounding future inflation but also downside growth risks. The statement goes on to explain,
Aside from fuel, goods prices have been relatively contained. The exchange rate has been resilient, with the rand close to where it started the year against the dollar, and stronger against the euro. This has helped with import prices. Food inflation has also slowed recently, which reflects good harvests, as well as fading effects from the outbreak of foot-and-mouth disease. El Niño may start affecting food supply next year, but this is still a risk factor, not part of our baseline. To conclude, the inflation outlook has improved slightly since our last meeting, but inflation is still too high, while growth is weak. We are setting policy to achieve 3% inflation over time, ensuring the current supply shock does not de-anchor inflation expectations.
The Middle East’s re-escalating war is putting pressure on long term interest rates. Ten-year sovereign debt yields rose overnight by five basis points in the United States and Great Britain where an expansionary fiscal policy is being unfolded by the new government. Yields also rose three basis points in France, Italy and Switzerland and by two bps in Germany, Japan Spain and Australia.
Prices for Bitcoin and gold are lower. Among stock markets, higher closes today of 4.4% in South Korea, 1.3% in Hong Kong, and 0.5% in China and Japan gave way to selloffs exceeding 1% in Euroland. The DOW, SPX and Nasdaq are also down at least 1.0% reflecting as well the uncertainty surrounding AI spending and regulation.
The ECB‘s trio of interest rates including a 2.4% refinancing rate had been raised in June for the first ime since September 2023 but were left unchanged at this week’s review, which matched the expected outcome. Officials remain cautious:
The outlook for energy prices, while highly volatile, currently stands close to the baseline of the June Eurosystem staff projections and well above the levels recorded prior to the conflict in the Middle East. Uncertainty remains high and the full inflationary impact of the energy shock has yet to play out.
Likewise, Turkey’s key interest rate was kept at 37.0%, its level since a 100 basis point cut in January. Turkish consumer price inflation has exceeded 30.0% since December 2021 versus a medium-term target of 5%. Single-digit inflation isn’t expected to be restored before late 2028. Officials reiterated in today’s statement that
The tight monetary policy stance, which will be maintained until price stability is achieved, will strengthen the disinflation process through demand, exchange rate, and expectation channels.
Today’s data highlights include
- A drop in U.S. new weekly jobless insurance claims to 187k, matching the lowest level since the first year of the Nixon Presidency.
- Consumer confidence this month was at a 37-month high in Turkey, a 2-month low in Denmark, a 5-year high in Slovenia, and a 4-month high in the Netherlands.
- French business confidence brightened somewhat this month, rising to a 4-month high but remaining below the long-term average. Most sectors improved. Wholesaling was a notable exception, however.
- Icelandic consumer price inflation of 5.3% in July was at a 4-month high. Producer price inflation in that economy jumped to a four-year peak of 19.4% as of June.
- Although only 1.9%, CPI inflation in Singapore was at a 21-month high last month.
- Monthly Australian labor market statistics revealed unchanged unemployment of 4.4% and the biggest rise in jobs (76.3k) in 14 months.
- Canadian retail sales rose 0.4% on month and 5.9% on year in June.
Copyright 2026, Larry Greenberg. All rights reserved.
Tags: Central Bank of Turkey, European Central Bank, Houthis, South African Reserve Bank, U.S. new jobless insurance claims
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