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ZAR: Rand Stays Softer, FRAs Slip On CPI Miss

ZAR

USD/ZAR has paused a three-day decline before having the opportunity to test Jan 6 low of 18.4323, which remains a key bearish target. A break here would open up Dec 23 low of 18.2503. Meanwhile, the rate deals at 18.5250, a touch higher on the day, with bulls looking for firmer gains towards Jan 13 high of 19.2296 and Apr 23 high of 19.2696.

  • The focal point this morning was South Africa's December CPI report, which revealed that the acceleration in headline inflation was smaller than expected. It quickened to +3.0% Y/Y from +2.9% prior, while core inflation unexpectedly slowed to +3.6% Y/Y from +3.7% before.
  • Inflation data came out a week before the SARB is due to hold its first monetary policy meeting this year (Jan 30), with economists speculating that another 25bp rate cut might be in the pipeline. Against this backdrop, Governor Kganyago warned earlier this week that protectionist US trade policies could boost inflation and reduce the pace of monetary accommodation.
  • Later today (11:00GMT/13:00SAST), Statistics SA will release November retail sales data, which will provide an update on the condition of domestic consumer demand. Consensus looks for a slight deceleration in real retail sales to +5.8% Y/Y from +6.3%. Note that the release covers the month of November, which makes it less up-to-date.
  • SAGB yields have declined from the off, with South Africa's 5-year and 10-year breakeven inflation rates last seen at 4.32% and 5.39% respectively. FRAs sold off in reaction to CPI data, with the spread between 12x15 contracts and 3-month JIBAR widening to around36-37bp.
  • Otherwise, the aggregate BBG Commodity Index has weakened by 0.3%, but the precious metals subindex is up by 0.2% and gold changes hands ~$6.4/oz. above neutral levels.
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USD/ZAR has paused a three-day decline before having the opportunity to test Jan 6 low of 18.4323, which remains a key bearish target. A break here would open up Dec 23 low of 18.2503. Meanwhile, the rate deals at 18.5250, a touch higher on the day, with bulls looking for firmer gains towards Jan 13 high of 19.2296 and Apr 23 high of 19.2696.

  • The focal point this morning was South Africa's December CPI report, which revealed that the acceleration in headline inflation was smaller than expected. It quickened to +3.0% Y/Y from +2.9% prior, while core inflation unexpectedly slowed to +3.6% Y/Y from +3.7% before.
  • Inflation data came out a week before the SARB is due to hold its first monetary policy meeting this year (Jan 30), with economists speculating that another 25bp rate cut might be in the pipeline. Against this backdrop, Governor Kganyago warned earlier this week that protectionist US trade policies could boost inflation and reduce the pace of monetary accommodation.
  • Later today (11:00GMT/13:00SAST), Statistics SA will release November retail sales data, which will provide an update on the condition of domestic consumer demand. Consensus looks for a slight deceleration in real retail sales to +5.8% Y/Y from +6.3%. Note that the release covers the month of November, which makes it less up-to-date.
  • SAGB yields have declined from the off, with South Africa's 5-year and 10-year breakeven inflation rates last seen at 4.32% and 5.39% respectively. FRAs sold off in reaction to CPI data, with the spread between 12x15 contracts and 3-month JIBAR widening to around36-37bp.
  • Otherwise, the aggregate BBG Commodity Index has weakened by 0.3%, but the precious metals subindex is up by 0.2% and gold changes hands ~$6.4/oz. above neutral levels.