Rand Reverses Gains, Becomes Worst EMEA Performer

Spot USD/ZAR has turned bid, reversing initial losses, which comes after the rate struggled to extend weakness over the past couple of days. Local headline flow has been sparse and some of the pair's upswing may have been driven by profit-taking in the wake of steep losses seen earlier this month. When this is being typed, USD/ZAR trades at ZAR18.3615, ~1,670 pips higher on the day, with familiar technical levels still in play.

• There have been some negative signals in second-tier South African data today, although these are not usually market movers. The SARB's leading Business Cycle Indicator fell by 1.0% M/M to 110.3 in April, while the previous reading was revised sharply lower to 111.5 from 117.8. Separately, the BER's quarterly Retail Trade survey showed that retailer confidence fell to 20% in 2Q2023 from 34% prior, reaching the worst levels since strict COVID-19 restrictions imposed in mid-2020.
• There is some disappointment surrounding communique from China's State Council meeting held last Friday, as the authorities said they were studying new stimulus measures but failed to propose any specific measures. The PBOC's smaller-than-expected LPR cut added to pessimism about the outlook for China's economic recovery.
• SAGBs have sold off sharply across the curve, with South Africa's 10-year breakeven inflation rate climbing to new one-week highs. The FTSE/JSE All Africa Index has shed ~1.1% thus far.