Free Trial

ZAR Plummets -2.70% as Pre-MTBPS Optimism Unwinds Sharply, Focus Shifts to Grants Policy

SOUTH AFRICA
  • USD/ZAR trades -0.12% lower this morning, drifting lower after yesterday's aggressive sell-off post US CPI.
  • As expected, ZAR became a magnet for risk-off conditions following the higher print – falling 2.70% vs the USD to reach as high as 15.4676.
  • While global risk conditions should continue to drive some $-side volatility as markets digest recent US data, the MTBPS will be the key focal point of the day.
  • Markets will look to Godongwana's ability to sustain the recent fiscal consolidation push in his maiden budget, which he was advocating firmly in the lead-up to today.
  • However, recent pressure from the ANC and Unions for a universal basic income grant risk adding permanent cost structures in place with an all too temporary tax windfall.
  • Who wins out in this regard will be a vital indicator for SA's medium to long-term fiscal outlook – having made substantial progress on reducing the deficit this year.
  • Fiscal tightness will likely be received well by markets with ZAR & SAGBs likely to retraces some of yesterday's accentuated weakness – while the opposite could see USD/ZAR extend from yesterday's bullish engulfing candle beyond the 15.50 handle.
  • Intraday Sup1: 15.2937, Sup2: 15.212, Sup3: 15.1089, Res1: 15.473, Res2: 15.6003, res3: 15.6625
MNI London Bureau | +44 020-3983-7894 | murray.nichol@marketnews.com
MNI London Bureau | +44 020-3983-7894 | murray.nichol@marketnews.com

To read the full story

Close

Why MNI

MNI is the leading provider

of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.

Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.