Rand Trims Losses, Headline Inflation Slowdown Comes With Hotter Food Price Growth

Spot USD/ZAR has eased off session highs (ZAR18.0554) and is stabilising just shy of the psychological ZAR18.0000 level, with local players digesting a slew of macroeconomic data released today.

• The rate last deals at ZAR17.9572, ~580 pips above neutral levels, with technical levels outlined in our previous update still in play.
• Local-currency bond yields sit higher (albeit off highs), curve runs steeper as we type. Benchmark FTSE/JSE Africa All Share Index has added ~0.2% thus far.
• CPI inflation printed broadly in line with expectations, albeit core prices provided a marginal downside surprise (steady at +4.9% Y/Y vs. +5.0% expected). A slowdown in headline prices masked hotter food price inflation, which quickened to a 14-year high of +13.4% Y/Y. This will maintain pressure on the SARB to keep interest rates elevated, even as growth concerns are coming to the fore.
• Retail sales unexpectedly contracted in December. The consensus call was for a 0.5% Y/Y increase, while retail sales fell by 0.6% from the previous year.
• The SACCI Business Confidence Index fell to 112.9 last month from 117.3 prior.