Rand Outperformance Continues, Disinflation Proves Faster Than Expected

Spot USD/ZAR has been offered, with the rand topping the EMEA pile for the second consecutive day. The pair last deals at 18.6530, ~1,470 pips below neutral levels, approaching support from the 50-EMA at 18.6006. Conversely, a break above 19.3301, the 76.4% retracement of the Jun 1 - Jul 27 downleg, would reaffirm overall bullish conditions.

• South Africa's price pressures cooled more than forecast in July. Headline inflation eased to +4.7% Y/Y, the lowest level in two years, printing below the +4.9% median estimate. Core inflation slowed to +4.7% Y/Y versus +4.9% expected. This should be good news for the SARB, which is trying to anchor inflation and inflation expectations at the +4.5% Y/Y target mid-point.
• Inflation data triggered a downward adjustment to the local FRA curve, as market participants pared SARB rate-hike wagers amid signs that monetary tightening delivered to data is bearing fruit. SAGB yields extended losses, with 10-year breakeven inflation rate last seen at 6.70%.
• In global environment, China continues to attract attention, with BBG reporting overnight that "state-owned banks were selling USD/CNY at around 7.29 level around noon," while clients were buying dollars. Another global factor to watch this week is the start of the Jackson Hole symposium.