Rand Weakens Under Pressure From Chinese Data, Intensified Loadshedding

Spot USD/ZAR has advanced for the second consecutive day as weak data out of China has dampened risk appetite, while Eskom ramped up loadshedding to levels last seen a couple of months ago. The rate at 19.2301 (over +1,500 pips on the day) is approaching resistance from 19.3301, the 76.4% retracement of the Jun 1 - Jul 27 sell-off. On the flip side, bears look for a pullback towards Aug 24 low of 18.3805, a key near-term layer of support.

• the Mail & Guardian published an interview with SARB Governor Lesetja Kganyago, who reiterated his call for a lower inflation target, arguing that lower inflation gives central banks more room to respond to economic shocks.
• Disappointing Chinese PMI data weighed on market sentiment overnight, as Caixin Services PMI worsened to 51.8 in August from 54.1 prior, missing the median estimate of 53.5 and printing at the worst level this year.
• By contrast, South Africa's S&P Global PMI returned to expansionary territory, improving to 51.0 in August from 48.2 prior, with accompanying commentary pointing to "an encouraging turnaround in the private sector economy".
• However, S&P highlighted that "loadshedding, supply disruption and currency weakness continue to hinder firms and impact demand," at a time when Eskom has just ramped up power outages to Stage 6 until further notice.
• Looking ahead, South Africa's Q2 GDP will be published at 10:30BST/11:30SAST. The economy may have expanded 1.2% Y/Y in the three months through end-June, according to Bloomberg consensus forecast.