Rand Pauses Corrective Sell-Off, Focus Turns To Election & SARB Rate Decision

A sharp correction of its earlier sell-off allowed USD/ZAR to swing to a weekly gain on Thursday, the pair's first after four consecutive weeks of losses. The corrective rebound was driven by a shift in the global interest-rate outlook, with incoming US data staying under the microscope.

• The corrective rally has lost steam this morning and USD/ZAR has shed around 400 pips to last trade at 18.4375. Bears keep an eye on May 21 low/round figure of 18.0290/18.0000. Meanwhile, the 20-EMA has been pierced and bulls look for gains towards the 50-EMA at 18.6238.
• The focus turns to the key items on the local political calendar next week, namely the national election (May 29) and SARB monetary policy decision (May 30).
  • Sentiment around the election has improved as several polls suggested that the ANC might manage to avoid partnering with any of the radical parties, despite the expected loss of parliamentary majority.
  • The SARB is widely expected to stand pat on rates as rhetoric remains hawkish, while the key metrics of inflation remain above the +4.5% Y/Y mid-point of the target range.
• SAGBs are on the back foot, with South Africa's 10-year breakeven inflation rate rising to 6.71%.
• Precious metals have stabilised after a two-day decline, with gold trading ~$8/oz. higher on the session.