Rand Strengthens Amid Broader Risk-On Tone, Ramaphosa's SONA Eyed

Spot USD/ZAR trades at ZAR17.7011, down ~680 pips on the day, with bears looking for a retreat past Feb 2 low of ZAR16.9317 and towards Jan 12 low of ZAR16.6950. That said, yesterday's foray above Dec 13 high of ZAR17.7601 reinforced the underlying bullish theme, with topside focus falling on Dec 1 high of ZAR17.9596.

• USD/ZAR implied volatilities have crept higher ahead of the upcoming political risk events such as SONA (tonight), Cabinet reshuffle (TBD) & Budget (February 22). 1-week & 1-month implied volatilities printed their best levels in two weeks.
• The aggregate BBG Commodity Index has added ~0.3% today, with the precious metals subindex last ~0.2% better off.
• Local-currency bonds are firmer across the curve, even as yields have ticked away from lows, with 10-year inflation breakeven rate sitting at 5.96%.
• South Africa's mining production fell 3.5% Y/Y in December, with the prior reading revised to -9.2% from -9.0%. The outturn was better than the -5.2% consensus call.
• December manufacturing output will be published at the top of the hour. It is expected that industrial production may have shrunk 3.6% Y/Y in the last month of 2022.