Rand Fails To Hold Onto CPI-Inspired Gains Despite Hawkish Data Signal

Spot USD/ZAR quickly recouped modest losses registered on the back of above-forecast CPI figures released out of South Africa. The pair last deals at 18.7401, just over 1,000 pips higher on the day. Should bulls manage to clear Nov 10 high of 18.8057, they would be looking for the formation of a double bottom pattern, which would set the stage for a move towards Oct 26 high of 19.2710. Bears keep an eye on the 18.00 mark and the 76.4% retracement of the Jul 27 - Oct 6 bull phase at 17.9434.

• Headline inflation accelerated to +5.9% Y/Y in October, approaching the upper end of the SARB's +3.0%-6.0% Y/Y target band. The median estimate in Bloomberg survey was +5.6% and the forecast range was +5.2% to +5.8%. Core inflation edged lower to +4.4% Y/Y versus +4.2% expected.
• The release of South African inflation data inspired the addition of hawkish SARB bets, with FRAs ticking higher across the curve in sympathy with SAGB yields. The central bank will announce its next monetary policy decision tomorrow after voting 3-2 to keep interest rates unchanged in September.
• Otherwise, headline flow coming out of South Africa has been negative for the rand. Eskom was forced to ramp up loadshedding to Stage 4 until further notice, while parliament backed a resolution urging the government to sever diplomatic ties with Israel, which might become another source of tensions in relations with the US.