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USD/ZAR: SARB Delivers In Line With Expectations, Mixed Hawkish/Dovish Factors at Play

SOUTH AFRICA
  • USD/ZAR trades mostly flat around the open, hovering marginally below the 14.00 handle. ZAR rallied on the back of yesterday's SARB, supported by upbeat growth forecasts and buying activity in SAGBs.
  • Yesterday's SARB came in as expected, keeping rates on hold at 3.5%, making a few forecast revisions but delivered mixed dovish/hawkish signals.
  • The overall result is still "wait and see", however, despite phrasing shifting from "balanced" inflation risks to "are to the upside."
  • Muted demand pressures should keep the SARB in holding pattern until 4Q21-1Q22, but with inflation contained around/below midpoint of the range and Kganyago acknowledging the need to keep policy as loose as possible to support the recovery, the bar seems relatively high for premature hikes in the absence of unforeseen changes to the outlook.
  • Comments from Mboweni about not breaking the spending cap amid tight wage negotiations is a positive sign from govt which has been showing weakness in Eskom discussions.
  • Third wave risks continue to escalate as cases break the 3,500 mark and appear to be rising. USD/ZAR looking heavy around the 14.00 handle, but will need $ weakness to support the next leg lower towards 13.56.
  • Intraday Sup1: 13.9532, Sup2: 13.8659, Res1: 14.0768, Res2: 14.1536
MNI London Bureau | +44 020-3983-7894 | murray.nichol@marketnews.com
MNI London Bureau | +44 020-3983-7894 | murray.nichol@marketnews.com

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