Morning Trade Sees Rand Edging Ahead Of EMEA Peers

Spot USD/ZAR continues to move away from cyclical highs printed last week at 19.6399 and is approaching trendline support drawn off Aug 24 low and intersecting at 18.8777. The pair last deals at 18.9282, around 900 pips shy of neutral levels, and a move through that trendline would open up Sep 20 low of 18.6825. On the flip side, bulls look for a rebound towards 19.6399.

• From a cross-asset perspective, the commodity complex is slightly firmer, with both the composite BBG Commodity Index and the precious metals subindex each adding 0.5% today. SAGB yields are slightly lower, with 10-year breakeven inflation rate extending its recent downward move to last sit at 7.02%.
• The IMF revised South Africa's 2023 growth outlook higher by 0.6pp to +0.9%, noting that power cuts in 2Q2023 were less severe than expected. Separately, the Bank of America suggested that the SARB could raise interest rates by another 25bp next month due to rand weakness, higher oil prices and the outbreak of avian flu.
• Aforementioned factors may have filtered through into the ongoing debate on the SARB rate outlook, with market participants unsure if the tightening cycle is over. That being said, South African FRAs have been trading on a heavier footing over the past few days.