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Rand On Front Foot Ahead Of SARB MonPol Decision


Spot USD/ZAR has moved away from lows (ZAR17.0133) but remain under water, last dealing at ZAR17.0902, down ~200 pips on the day. From a technical viewpoint, further losses past Jan 12 low of ZAR16.6950 would encourage bears, while bulls look for a rebound towards Jan 6 high of ZAR17.4343. SARB rate decision takes the limelight after PPI data surprised to the downside, with USD/ZAR overnight implied volatility printing one-week highs ahead of the central bank announcement.

  • From a cross-asset perspective, the composite BBG Commodity Index sits a tad lower on the day, while the precious metals subindex has reversed earlier gains to last trade ~0.4% worse off.
  • The initial bull flattening impetus has moderated, with local-currency bond yields trimming initial losses, but they still sit below neutral levels. South Africa's 10-year breakeven inflation rate sits at 5.86% after lodging a new one-year low at 5.83%.
  • Factory-gate inflation eased to +13.5% Y/Y last month from +15.0% prior versus +13.9% expected, with price growth flat on a monthly basis. The data will be taken as further evidence of moderating price pressures after a couple of downside suprises in recent CPI reports.
  • The focus now shifts to SARB monetary policy decision, which will be announced during a press conference with Governor Kganyago at 15:00SAST/13:00GMT. The central bank is expected to raise interest rates further, while slowing the pace of tightening.

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