Rand Struggles With Domestic Politics In Focus

Spot USD/ZAR sits at 18.9520, adding nearly 700 pips this morning, despite broadly weaker greenback, as domestic political developments have stolen the limelight. Bulls look for a firmer push through Feb 23 high of 19.3899. On the flip side, bears keep an eye on Mar 13 low of 18.5066.

• Pre-election matters come to the fore, with the clock ticking for South African parties to lure voters ahead of the May 29 polls. The Electoral Court rejected the ANC's bid to deregister ex-President Jacob Zuma's MK Party. Separately, the High Court is expected to issue a ruling in Speaker Mapisa-Nqakula's graft case next Tuesday. Both cases represent political setbacks for the ANC, which is fighting an uphill battle to defend its parliamentary majority. The rand's depreciation this morning may have been linked to the court verdict on the MK Party, with the formation expected to drain some support from the ANC (especially in Zuma's home base of KwaZulu-Natal). this would increase the likelihood of the ANC being forced into an unstable coalition pact.
• The SARB will announce its monetary policy decision tomorrow and is widely expected to keep interest rates unchanged, possibly in a unanimous vote. The proximity of the elections and inflation running above the target mid-point reduce the odds of an early start to the easing cycle. Click here to see our preview of the decision.
• South Africa's non-farm payrolls rose 0.9% Y/Y in 4Q23 (versus revised +4.2% Y/Y in 3Q23) but fell 1.8% Q/Q on a sequential basis (versus revised +0.4% Q/Q prior).
• The National Treasury sold ZAR1.3bn of 2037 bonds (bid/cover 2.28x), ZAR1.3bn of 2040 bonds (bid/cover 1.54x) and ZAR1.3bn of 2048 bonds (bid/cover 2.14x).
• SAGB yields are higher across the curve, South Africa's 10-year breakeven inflation rate has soared to a new cyclical high of 6.92%.