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ZAR: Fresh Highs in Gold, Greenback Weakness Aiding ZAR Recovery

ZAR

As we have noted above, the softer US IP data on Thursday coincided with the start of the slow grind lower for the broad dollar index and US yields, which has aided the 1.4% pullback in USDZAR from yesterday’s highs.

  • Fresh record highs in spot gold and the firmer-than-expected China growth data overnight will both be providing an additional tailwind to the rand as well, with these factors assisting the likes of MXN across the EM space.
  • Meanwhile, the more positive domestic picture has been supported by comments from South African officials who are sounding increasingly confident on the inflation outlook – SARB Governor Kganyago said earlier in the week that "we have an opportunity to achieve permanently lower inflation and therefore permanently lower interest rates."
  • Local focus shifts to CPI data for September next week, where headline inflation is expected to cool to +3.8% Y/Y from +4.4%.
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As we have noted above, the softer US IP data on Thursday coincided with the start of the slow grind lower for the broad dollar index and US yields, which has aided the 1.4% pullback in USDZAR from yesterday’s highs.

  • Fresh record highs in spot gold and the firmer-than-expected China growth data overnight will both be providing an additional tailwind to the rand as well, with these factors assisting the likes of MXN across the EM space.
  • Meanwhile, the more positive domestic picture has been supported by comments from South African officials who are sounding increasingly confident on the inflation outlook – SARB Governor Kganyago said earlier in the week that "we have an opportunity to achieve permanently lower inflation and therefore permanently lower interest rates."
  • Local focus shifts to CPI data for September next week, where headline inflation is expected to cool to +3.8% Y/Y from +4.4%.