ZAR: Cabinet Announcement Lends Support To Rand

The rand remains afloat after the announcement of South Africa's new cabinet, which put an end to the unnerving process of coalition negotiations. Spot USD/ZAR last trades at 17.9964, around 1,950 pips lower on the day, with bears looking for losses towards and beyond Jun 21 low of 17.8689. On the flip side, the 50-EMA provides the initial layer of resistance at 18.4449.

• The ability of the ANC and DA to move past mutual distrust and break the deadlock in talks, as well as the composition of the new cabinet (continuity in key economic portfolios, including the Finance Ministry), helped reassure investors and stoke optimism about South Africa's macroeconomic outlook.
• Bloomberg cited RMB as noting that the reappointment of Finance Minister Godongwana was particularly significant, with their analysts suggesting that momentum indicators are pointing to scope for further rand appreciation. HSBC wrote that the retention of Godongwana and Electricity Minister Ramokgopa bodes well for policy continuity in key areas. Goldman Sachs flagged expectations of continued fiscal consolidation and some upside potential for reforms, despite warning that the coalition might prove fragile.
• SAGB yields are broadly lower across the curve, with South Africa's 5-year and 10-year breakeven inflation rates sitting at 5.02% and 6.04% respectively.
• The composite BBG Commodity Index has added 0.1%; precious metals subindex is down 0.2%.