Rand Ticks Lower, Implied Vol Rises Ahead Of SONA

Spot USD/ZAR sits a touch higher on the day and its overnight implied volatility rose this morning, with President Cyril Ramaphosa's SONA providing the main point of note on the agenda. The speech will be scrutinised for any new measures to rescue the embattled SOEs (last year the SONA was used to announce a state of emergency over the ongoing power crisis), which may add strain to South Africa's budget. The President will also discuss the track record of his ANC party ahead of this year's national and provincial elections. He is unlikely to announce the date for the elections today but will do so within 15 days.

• Spot USD/ZAR operates at 18.9241 and bulls look for a swing past Jan 22 high of 19.2180 before setting their sights on targets further to the topside. Bears need a dip through Feb 2 low of 18.5578 before taking aim at key support from Dec 15 low of 18.1092.
• The JSE said it will start accepting government bonds (as opposed to just cash) as collateral against open derivative positions. SAGB yields are slightly higher across the curve, with 10-year breakeven inflation rate last seen at 6.40%.
• Elsewhere, China released another set of deflationary data overnight, with both CPI and PPI missing expectations.
• South Africa will report its manufacturing output for December at 11:00GMT/13:00SAST.