Rand Extends Morning Gains, Stabilisation In Energy Situation Supports Its Rally

Morning USD/ZAR selling interest has persisted as the session progressed, with the pair plunging to its worst levels since May 4. When this is being typed, USD/ZAR trades at ZAR18.2768, down 3,520 pips (~1.9%) on the session. Bears look to attack support from a couple of April's intraday lows printed in the vicinity of the psychological ZAR18.00 figure.

• Relative stabilisation in South Africa's energy supply is supportive for the rand, with state-owned electricity utililty Eskom announcing today that the suspension of daytime power outages will continue until further notice. Reports suggesting that Electricity Minister Kgosientsho Ramokgopa will travel to China this week to facilitate the supply of solar panels have supported this sentiment, especially as Beijing's ambassador to SA announced that China will donate solar panels and generators to the sub-Saharan country.
• Elsewhere, there has been no follow through on US-SA diplomatic/trade tensions, which has allowed the rand to appreciate but also renders it vulnerable to any negative developments on the matter. On the other hand, Deutsche Bank wrote that "there is no valid basis for [SA's] exclusion from AGOA," while "in the event that SA no longer has access to AGOA, it's not clear that the direct consequences are that severe."
• South Africa's retail sales contracted by 1.6% Y/Y in April after a revised -1.5% outturn for March, printing below the -1.1% consensus forecast. However, seasonally adjusted retail sales rose by 0.4% M/M, beating expectations of a 0.3% decline. Separately, the SACCI's Business Confidence Index fell to 106.9, extending its YtD decline to 10.4 points, with the largest contributor to the deterioration in the short term being linked to foreign trade relations.