Rand Weakens After Weak Chinese PMI Overnight, SARB Comments Under Scrutiny

Spot USD/ZAR gave away the bulk of its Asia gains as the London session got underway, before posting another leg higher, which coincided with recovery in the BBDXY. The pair last deals at 18.7825, up ~1,350 pips on the session. A clean break above former trendline support at 18.9386 would expose Jun 30 high of 19.0434. On the flip side, bears look for losses towards Jun 27 low of 18.4310 and Jun 16 low of 18.1250.

• There has been plenty of SARB speak on the wires since yesterday afternoon, with Governor Kganyago speaking again on the radio as we type. The official said that monetary tightening will end when "we see that inflation is converging towards what we consider to be a level that is consistent with price stability, which for us is +4.5% Y/Y."
• The latest round of Chinese PMIs disappointed, with Caixin Services PMI weakening to 53.9 in June from 57.1 prior versus 56.2 expected. Signs of weakness in China's economic recovery may weigh on the rand, as the country is South Africa's top trading partner and a chief buyer of its commodities.
• South Africa's S&P Global PMI improved to 48.7 in June from 47.9 prior. Accompanying commentary suggested that the "private sector saw some relief in June as the intensity of load shedding was much weaker than anticipated." However, "sharply rising output prices continue to harm client demand as businesses and households limit spending in the current high-inflation environment."