Rand Weakens Ahead Of Inflation Data, SARB Rate Decision This Week

The rand is in retreat at the start to the week, underperforming its EMEA peers, with the upswing in USD/ZAR outpacing the latest uptick in the BBDXY index. The rate last changes hands at 19.1665 (around 1,360 above neutral levels) after briefly showing above Jan 17 high of 19.1872. A clean break above Oct 6 high of 19.6399 would represent a clear bullish signal. Bears initially look for a corrective pullback towards Jan 12 low of 18.5385.

• Citibank wrote in a note that they are long USD/ZAR "due to possible rise of credit risk and fiscal concerns again ahead of the budget" expected next month. Citi warned that "the Transnet and Eskom situation already remains tricky, and the risk is if the situation worsens, the export sector could be hit even harder".
• SAGB yields are marginally lower across the curve, with 10-year breakeven inflation rate unchanged at 6.31%. The commodity space is softer, with the composite BCOM Index last 0.7% lower on the day. The precious metals subindex is also 0.7% worse off as we type.
• The focus in South Africa turns to inflation data and SARB rate decision this week. December CPI will cross the wires Wednesday, with PPI and Governor Kganyago's presser due Thursday. USD/ZAR 1-week implied volatility has continued to edge higher, albeit it remains subdued relative to the levels from recent months.