ZAR: Rand Loses Ground, Cabinet Talks Extend Into New Week

Spot USD/ZAR has crept higher early on, despite a downtick in the BBDXY Index, with South African domestic political risk still front and centre. President Cyril Ramaphosa and Democratic Alliance (DA) leader John Steenhuisen are expected to meet today to discuss the allocation of cabinet portfolios amid ongoing efforts to balance the interests of parties forming the so-called government of national unity (GNU) and build the new administration.

• Latest reports indicated that the brinkmanship of the ANC and DA led to the temporary collapse of cabinet talks in Gauteng, with provincial Premier Lesufi forced to postpone the announcement of his cabinet at the eleventh hour. Some have suggested that Lesufi decided not to pull out of negotiations with the DA due to a personal intervention by President Ramaphosa, who wanted to avoid adverse consequences for national coalition talks.
• USD/ZAR last deals at 18.0499, around 800 pips above neutral levels as we type. From a technical perspective, a move through the 50-EMA at 18.4939 would turn the focus to the round figure/Jun 6 high of 19.0000/54. On the flip side, bears look for a return below the 18.0 figure and further losses towards Jul 27, 2023 low of 17.4193, a key support level.
• SAGB yields are higher across the curve, with 5-year and 10-year breakeven inflation rates climbing to 5.03% and 6.08% respectively.
• The composite BBG Commodity Index sits +0.1% on the day, with the precious metals subindex last seen +0.5%.