USD/ZAR Extends Gains With Political Risk In Sight

Spot USD/ZAR has edged higher to new multi-week highs, building on its ~2.4% gain lodged on Friday, as the market digested expectation-beating U.S. NFP data. This comes after the pair charted a hammer candlestick last Thursday, which suggested potential for a subsequent rebound. The rate last deals at ZAR17.5090, up ~335 pips on the day.

• From a technical standpoint, topside focus turns to Dec 13 high of ZAR17.7601 and a break here would expose Dec 1 high of ZAR17.9596. Meanwhile, bears look for a retreat past Feb 2 low of ZAR16.9317 before setting their sights on Jan 12 low of ZAR16.6950.
• The broader commodity complex has stabilised in the wake of its post-NFP sell-off, with the aggregate BBG Commodity Index last seen little changed on the day., The precious metals subindex has recovered from its post-NFP lows and last sits ~0.8% higher on the session.
• Local-currency bonds have weakened and last trade 5.6-6.5bp cheaper across the curve, with the broader core FI space coming under pressure. South Africa's 10-year breakeven inflation rate has extended its move away from recent cyclical lows and now sits at 5.88%.
• There are no notable data releases in South Africa today, but the country is preparing for a busy political week. President Cyril Ramaphosa is expected to reshuffle his Cabinet before he delivers the State of the Nation Address (SONA) on Thursday.