ZAR: Rand Displays Limited Reaction to CPI; 3x6 FRAs Lowest Since Mar’2023

USDZAR displayed limited reaction to the CPI data, with its downward trajectory unchanged since the release and the pair now down 0.2%. Notably, South Africa’s 3x6 FRA’s have dipped below 8 points today, reaching its lowest level since March 2023 as markets continue to price an easier policy outlook.

• The headline inflation figure for June was marginally lower than the previous month at +5.1% (in-line with expectations) while core year-on-year was a touch below estimates at +4.5%. Overall, the data supports the view that headline inflation will moderate towards the SARB’s +4.5% Y/Y midpoint target in H2.
• Yesterday, poor sentiment in China and the associated weakness in metals led to a substantial rally in USDZAR. Price action in the second half of the session saw the pair give back a bulk of those gains. Today, the Bloomberg precious metals sub-index is around ~0.3% higher, with the more stable commodities backdrop providing some relief to the rand.
• However, the wider emerging markets basket continues to be hampered by the risk-off tone across markets. Disappointing tech earnings posted after-hours yesterday weighed on global equities while the lack of major policy support following the Third Plenum continues to reinforce bearish sentiment in China. Meanwhile, European PMI figures have disappointed this morning.