Rand Extends Gains, Cabinet To Discuss BRICS Matters

Spot USD/ZAR maintains its bearish bias from the past few days and last changes hands at ZAR19.1601, down ~420 pips on the session. Price action has followed a familiar pattern, with sales emerging into the London morning. Support from May 24 low of ZAR19.1352 is under pressure and a break here would open up May 16 low of ZAR18.9945. Conversely, bulls look for a rebound towards Jun 1 all-time high of ZAR19.9204 and the psychological ZAR20.00 figure.

• The Cabinet may discuss how to handle the upcoming BRICS summit after an inter-ministerial panel concluded its probe into the legal options surrounding the potential visit of Russian President Vladimir Putin. Pretoria is reportedly considering moving the summit to China or taking it online to avoid having to host the Russian leader who is wanted by the ICC over war crimes allegations. South Africa has been treading a tightrope between Russia and the West, with SARB Governor Kganyago warning lawmakers yesterday that a closer alignment with Moscow would expose the country to secondary sanctions and their devastating economic consequences.
• Data released overnight showed that Chinese imports shrank in May, but by a smaller margin than expected by economists.
• There has been some stabilisation in USD/ZAR risk reversals after their multi-day drop into the start of the new month. One-month tenor has barely moved this morning, despite continued losses in the spot rate.
• SAGB curve has steepened this morning. South Africa's 10-year breakeven inflation rate has extended its decline and last sits at 6.90%, its lowest point in three weeks.
• The composite BBG Commodity Index is ~0.2% better off, with the precious metals subindex down ~0.4%.