Rand Extends Gains With Cabinet Talks Well Underway

The rand is among the few EMEA currencies that managed to post gains today, with the BBDXY Index ticking higher early doors. When this is being typed, USD/ZAR trades at 18.1903, around 700 pips lower on the session, losing altitude for the third consecutive day. From a technical perspective, the next target on the downside is 18.0290, the low print of May 21. Conversely, a rebound above the 50-EMA (18.5874) could allow bulls to gain a foothold before they set their sights on the round figure/Jun 6 high of 19.0000/54.

• Parties forming the GNU coalition are in talks about the composition of President Ramaphosa's Cabinet, which is set to be dominated by the nominees of two largest parties ANC and DA. Sources told Bloomberg that the business-oriented DA would like to take some key portfolios in the economic cluster, but this has been frowned upon by the ANC.
• Against this backdrop, S&P wrote that they expect policy continuity when the new government takes office, while "the election outcome is broadly favourable for the economic and fiscal outlook, compared with the alternatives," despite well-documented challenges ahead.
• SAGB yields have sunk across the curve, with 10-year breakeven inflation rate dropping to 6.31%, the lowest point in four months. On that note, it is worth noting that the latest round of CPI data will be closely watched tomorrow.
• The composite BBG Commodity Index is down 0.3%, with the precious metals subindex down 0.2%.