Rand Draws Support From Post-Fed Impetus, '24 & '25 Inflation Expectations Increase

Spot USD/ZAR sold off sharply yesterday in reaction to the perceived dovish pivot from the Fed, with Chair Powell admitting that the Committee discussed the timing of future rate cuts at yesterday's meeting and it was expected that "this will be a topic for us, looking ahead". The pair has extended losses this morning amid continued greenback weakness and last deals at 18.6019, over 800 pips below neutral levels.

• Technically, a move through Nov 29 low of 18.4597 would give bears a green light for targeting Nov 15 low of 18.1117. On the flip side, bulls look for recovery towards Dec 11 high of 19.1386 and Oct 26 high of 19.2710.
• While local developments have been somewhat overshadowed by yesterday's showing from the Fed, it is worth noting that South African inflation expectations ticked higher again in Q4. Expectations in the latest BER survey were unchanged for 2023, but increased to +5.7% for 2024 and to +5.6% for 2025 from +5.5% and +5.3% respectively, which will provide some disappointment for the SARB. Non-farm payrolls and PPI data will be eyed later today, completing the latest round of wage/price data.
• The composite BBG Commodity Index has added 1.6% today, while the precious metals subindex has soared 3.5%. SAGB yields are sharply lower across the curve, with 10-year breakeven inflation rate last seen at 6.45% after testing recent cyclical lows at 6.39%.