Negative Risk Tone & Weaker Metals Weigh On Rand, SARB Rate Decision Eyed Thurs

Spot USD/ZAR starts the week on the front foot after the Asia session saw China COVID-19 concerns inspire broad-based demand for the greenback.

• The focus this week is on Thursday's monetary policy decision from the SARB. The final data input before the central bank's announcement is Wednesday's October CPI report. Headline inflation may have slowed to +7.4% Y/Y from +7.5% in September, according to the median estimate in a Bloomberg survey.
• South Africa's breakeven inflation rate printed fresh 3-month lows this morning and last sits at 6.24%. The rate lodged its 2022 highs at 8.00% in early Sep before easing off there and is now close to erasing its YtD advance (+11bp vs. 2021 close).
• The aggregate BBG Commodity Index fell overnight and last operates 0.44% below neutral levels amid the risk-negative tone. The precious metals subindex is down 0.82% at typing, while the industrial metals gauge is nearly 1% worse off.
• USD/ZAR trades at ZAR17.38, up ~12 pips on the day, holding a familiar range so far. Technically, a break above the 50-DMA (ZAR17.87) would encourage bulls, while bears look to force a break below ZAR17.11, which limited losses on Nov 15.
• Implied vols are higher across the curve, with 1-month tenor printing two-week highs at 16.33%.