Rand Extends Gains To Five-Month Highs

In-line US CPI data provided a fresh boost to EM FX on Wednesday, with spot USD/ZAR posting another downleg into Thursday morning. The pair last deals at 18.2350, 375 pips below unchanged levels, operating at its lowest levels in five months. The recent formation of a "death cross" bodes well for the bearish case and Dec 15 low of 18.1092 provides the next target on the downside. Meanwhile, our technical analyst flags the 20-EMA at 18.5660 as the initial layer of resistance.

• The SAGB curve has bull steepened, with the short end outperforming. 10-year breakeven inflation rate extending its sharp decline to 6.62%, a two-month low.
• The aggregate BBG Commodity Index has erased its initial gains, with the precious metals subindex oscillating around unchanged levels after yesterday's upswing.
• The FTSE/JSE Africa All Share Index is hitting cyclical highs, even as President Ramaphosa signed the controversial NHI bill into law, which has an adverse impact on South African health insurers.
• Anecdotally, there seems to be a tad more optimism about the likely outcome of this month's elections in South Africa, with research group Krutham noting that the ANC is unlikely to partner with radical parties. UBS wrote that local stocks could rally by up to 17% if the ANC enters a grand coalition with the main opposition DA.