Rand Turns Bid Amid S&P Credit-Rating Inaction, Technical Correction In USD/ZAR

USD/ZAR changes hands at ZAR19.2455, down 2,060 pips on the session, as the rand outperforms its EMEA peers by comfortable margins. A dip through May 16 low of ZAR18.9945 would bring May 2 high of ZAR18.5075 into view. Conversely, should bulls manage to force a break above recent all-time highs (ZAR19.5247), they could set their sights on the psychologically significant ZAR20.00 figure.

• Some of the rand's rally this morning could be attributed to the removal of a near-term risk of a negative review to South Africa's credit rating. S&P Global Ratings did not update the nation's rating on Friday, but the decision to defer the review came after an off-cycle downgrade to the outlook announced back in March.
• Technical correction could also be in play after USD/ZAR printed a new record high last Friday. The RSI failed to print a higher high at the time and has returned from overbought territory back under the 70 threshold this morning.
• SAGBs are slightly weaker across the curve. Bloomberg reported that YtD outflows from the local bond market have now exceeded the outflows for the whole 2022, which totalled $1.1bn. Still, Deutsche Bank recommended buying "extremely cheap" SAGBs, arguing that they are now "overpricing South Africa's challenges."
• CPI and PPI prints will be closely watched over the coming days, ahead of the announcement of the SARB's monetary policy decision. Consensus looks for a 50bp rate hike from South Africa's central bank.