Rand Weakens Ahead Of SARB Rate Decision, PPI Inflation Misses Forecasts

Participants look to the SARB rate decision to determine the direction of near-term USD/ZAR price action after the pair hovering near its historic highs over the past week. Some might see below-forecast inflation data from the last two days call into question the consensus call for another 50bp rate hike. USD/ZAR overnight implied volatility jumped higher this morning, before trimming the initial advance, with participants trying to assess the central bank's determination to protect the beleaguered rand from weakening past recent all-time lows.

• Spot USD/ZAR last changes hands at ZAR19.3247, up ~780 pips on the session. The all-time high of ZAR19.5247 provides the initial bullish target and a break here would expose the ZAR20.00 figure. Bears need a dip through May 16 low of ZAR18.9945 before taking aim at May 2 high of ZAR18.5075.
• South Africa's factory-gate inflation cooled to +8.6% Y/Y in April from +10.6% prior, missing the +9.0% median estimate. On a monthly basis, PPI growth flatlined. This comes after data showing that consumer-price inflation eased more than forecast.
• The local FRA curve has slightly corrected yesterday's reaction to these below-forecast CPI figures. Local-currency bonds are mixed across the curve.
• Reminder that the SARB rate decision will be announced during a press conference starting at 14:00BST/15:00SAST (live stream here).