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MNI is the leading provider
of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.
SOUTH AFRICA
- USD/ZAR has been trading in a broad but choppy 4.75% range (15.06-15.75) since early Jan – occupying the space between the 50 & 200dma within what most analysts consider to be its fair value range (14.80-15.50).
- Cuts to the PBoC’s RRR, improved terms of trade, risk flows from Russia amid geopolitical tensions and a brighter fiscal outlook going into the Feb budget have been supportive factors for ZAR set against a more hawkish Fed backdrop – allowing it to hold up well against the USD early in the year.
- Technical developments suggest a more bearish medium-term outlook with an inverse head and shoulders pattern forming in 2021’s price action with neckline support coming in around the 15.00 mark – just above the 200dma.
- Nevertheless, near-term USD/ZAR price action has been more bearish with sellers stepping in around the 50dma yesterday to challenge the rising trendline drawn off the 21 Jan lows.
- A break of this trendline and 15.2080 support may lead to more downside momentum towards the H&S trendline, 200dma & lower threshold of the fair value band in the coming sessions as pre-budget optimism supports the currency. Meanwhile a failure to break the trendline should see the cross move back higher.
- Markets are slightly less optimistic about ZAR’s medium-term prospects, however, with the current account surplus and terms of trade expected to narrow in 2H22 alongside a tightening of policy from the Fed.
- Muted domestic demand and weak growth have left SA with a relatively sanguine domestic inflation profile with most of the impetus in headline figures coming from external factors – limiting the SARB’s ability to hike too aggressively in 2022.
- Implied market pricing suggests expectations for an additional +141bp in hikes after receding from +175bp following a perceived dovish meeting from the SARB in Jan. Sell -side analysts speculate that inflation may have peaked in Jan at 5.9% in line with SARB forecasts, but risks remain skewed to the upside.
9x12 FRA - Jibar Spreads
MNI London Bureau | +44 020-3983-7894 | murray.nichol@marketnews.com
Why MNI
MNI is the leading provider
of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.
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