Rand Loses Ground Despite Strong M'fing PMI Print

There has been little benefit for the rand after the publication of expectation-beating South African Absa Manufacturing PMI, with the aggregate index improving to 54.0. The latest result indicates renewed expansion after a sub-50 (49.2) outturn for March and beats the consensus forecast of 50.5.

• The April print was probably boosted by a reprieve from power cuts, with South Africa enjoying its first full month without loadshedding since January 2022. However, businesses turned less optimistic about future conditions, with Absa suggesting that "the expectation of a return of loadshedding, relative to no disruptions currently, could explain this" alongside "concerns about fewer interest rate cuts."
• Spot USD/ZAR trades at 18.6286, now slightly above neutral levels. USD/ZAR 1-month implied volatility remains elevated (despite easing off cyclical highs) ahead of this month's general elections.
• Cheaper gold is not conducive to any potential renewed rand appreciation, with bullion last trading $18.5/oz. lower on the session. Bloomberg's gauge of precious metals strength has moved into negative territory.