Rand Garners Strength With Key Tech Level In Sight Despite Pessimistic Eskom Headlines

Offshore developments remain the main driver for the rand, which remains one of the best performers in the EMEA region (second-best at typing), despite some downbeat headlines related to South Africa's near-term energy situation.

• USD/ZAR dropped in reaction to below-forecast US CPI data. This coincided with an upswing in a BBG gauge of precious metals strength, which sits ~1% higher after printing new three-week highs. USD/ZAR trades at 18.2780 at typing, approaching key support from Jun 16 low of 18.1250.
• Eskom is running Stage 6 load-shedding between 14:00 and 5:00 and Stage 4 load-shedding between 05:00 and 14:00 until further notice amid the loss of some generating units, the extensive use of OGCTs and the inability to replenish pumped storage dam levels.
• On top of that, the utility told the Mail & Guardian that unprecedented Stage 8 power cuts remained a possibility this winter due to difficulties with refilling its water reservoirs. Rolling blackouts could reach new all-time highs for a short time, in the unlikely scenario in which numerous negative factors coincide.
• From the market perspective, the systematic improvement in Eskom's generation capacity over the past weeks may have taken the edge off this week's flare-up in load-shedding. However, participants will remain on the lookout for signs that electricity supply disruptions might worsen in a more sustainable manner.