Rand Oscillates Around Neutral Levels, Domestic Political Risk Remains In Focus

Spot USD/ZAR operates near neutral levels, which seems to be a function of two competng forces: (1) wider risk-off flows, and (2) optimism surrounding domestic politics. Some reports coming out of South Africa suggested that the ruling ANC might opt for a government of national unity (GNU) with the centrist DA and IFP, after the radical left-wing EFF and MK showed little interest in joining the arrangement. On the other hand, the situation remains extremely fluid, with a fresh IOL report pointing to a new opinion poll showing that the public "the public was more receptive towards the ANC and MK Party forming a coalition."

• The first sitting of the new parliament has been set for this Friday and lawmakers are expected to use this opportunity to elect the President and Speaker. Although the MK Party threatened to boycott the meeting and asked the Constitutional Court to block it, the consensus view seems to be that it will go ahead in any case.
• The rand is among the few EMEA currencies holding above water, with the ILS easily outperforming regional peers (see our earlier bullets for details) and CE3 FX lagging behind on post-election political jitters in the EU. Spot USD/ZAR last deals at 18.7253.
• SAGB yields are sharply lower amid wider bid into global FI markets. The National Treasury auctions ZAR1.25bn of 7.000% 2031 bonds, 8.250% 2032 bonds and 8.875% 2035 bonds each today.
• On the data front, SACCI Business Confidence fell to 107.8 in May from 108.9 prior. Meanwhile, manufacturing data will cross the wires at 12:00BST/13:00SAST.