ZAR: Broader Risk Aversion Dents Rand

Broader risk aversion has been sapping strength from the rand and the broader EM FX space (see our summary bullet above for more colour), with spot USD/ZAR adding more than 1,550 pips so far to last change hands at 18.4980. The focus is on Jul 2 high of 18.6627 and a break here would signal scope for a continued rally. On the flip side, bears look for losses towards Jun 21 low of 17.8689, the key near-term support level.

• The PBOC unexpectedly cut the rate applied to its 1-year MLF operations overnight by 20bp, the most since April 2020, while also providing the biggest net injection (CNY200bn) via the facility since January. This comes after a surprising cut to the 7-Day Reverse Repo Rate a few days back, but has failed to lift sentiment today.
• The aggregate BBG Commodity Index has shed 0.9%, with the precious metals subindex down 2.3% as we type. Gold trades ~$22.7/oz. worse off on the day. SAGB yields sit higher across the curve, with the 10-year breakeven inflation rate last seen slightly above neutral levels (last at 5.81%), albeit still fairly close to multi-year lows.
• Statistics SA will release June PPI data at 10:30BST/11:30SAST to complete the picture of domestic price pressures last month. Consensus looks for a downtick to +4.5% Y/Y from +4.6% recorded in May, while on a sequential basis factory-gate prices may have decreased by 0.2% M/M versus +0.1% prior.