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ZAR: Rand Looks Past Benign CPI Reading But SAGB Yields Tick Lower

ZAR
EM BulletBulletEmerging Market News

There has been little in the way of reaction to the release of below-forecast South African November CPI data, with spot USD/ZAR pulling back from session highs immediately after the data crossed the wires. The rate last deals at 17.8532, just over 400 pips higher on the day. Key resistance has been defined at 18.3951, the high print of Nov 14. Conversely, bears keep an eye on Nov 7 low of 17.2711.

  • Headline inflation remained below the +3.0%-6.0% Y/Y target range, printing at +2.9% and undershooting the consensus forecast of +3.1%. Core inflation edged lower to +3.7% Y/Y, missing Bloomberg median estimate of +3.8% and moving further below the target mid-point.
  • Today's benign CPI reading should cement expectations of another 25bp cut from the SARB next month. The central bank has already lowered the repo rate by the total of 50bp in this cycle, but Governor Lesetja Kganyago pledged to remain cautious "in an environment of uncertainty."
  • 12x15 FRAs ticked below the psychologically significant 7% level for the first time since early October and last sit around 80bp below 3-month JIBAR. SAGB yields dropped across the curve in reaction to the CPI report. South Africa's 5-year breakeven inflation rate sits at 4.26%; 10-year breakeven rate is at 5.26%.
  • On a different front, Bloomberg's composite commodity index has almost erased its earlier gains, as has the precious metals subindex, which currently sits just 0.2% above neutral levels. Gold trades ~$2.9/oz. lower on the session.
  • Looking ahead, October retail sales will cross the wires at 11:00GMT/13:00SAST.
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There has been little in the way of reaction to the release of below-forecast South African November CPI data, with spot USD/ZAR pulling back from session highs immediately after the data crossed the wires. The rate last deals at 17.8532, just over 400 pips higher on the day. Key resistance has been defined at 18.3951, the high print of Nov 14. Conversely, bears keep an eye on Nov 7 low of 17.2711.

  • Headline inflation remained below the +3.0%-6.0% Y/Y target range, printing at +2.9% and undershooting the consensus forecast of +3.1%. Core inflation edged lower to +3.7% Y/Y, missing Bloomberg median estimate of +3.8% and moving further below the target mid-point.
  • Today's benign CPI reading should cement expectations of another 25bp cut from the SARB next month. The central bank has already lowered the repo rate by the total of 50bp in this cycle, but Governor Lesetja Kganyago pledged to remain cautious "in an environment of uncertainty."
  • 12x15 FRAs ticked below the psychologically significant 7% level for the first time since early October and last sit around 80bp below 3-month JIBAR. SAGB yields dropped across the curve in reaction to the CPI report. South Africa's 5-year breakeven inflation rate sits at 4.26%; 10-year breakeven rate is at 5.26%.
  • On a different front, Bloomberg's composite commodity index has almost erased its earlier gains, as has the precious metals subindex, which currently sits just 0.2% above neutral levels. Gold trades ~$2.9/oz. lower on the session.
  • Looking ahead, October retail sales will cross the wires at 11:00GMT/13:00SAST.