ZAR: Rand Retraces Losses As Cabinet Talks Seem Poised To Resume

The rand retraces yesterday's losses, remaining exposed to swings in sentiment surrounding South African cabinet talks. While yesterday it seemed like the talks were on the verge of collapse, the Daily Maverick reported this morning that the DA's executive body resolved to return to the negotiating table. Much of the rand's recent price action has been driven by the pricing of the odds of the finalisation of the GNU cabinet, with the recent days seeing a series of abrupt turns on that front.

• Earlier this morning, BBG reported that BofA closed their bearish trade recommendation for the rand, noting that they anticipate the formation of a coalition government formed by the ANC and DA. This reflects broader hopes that talks would ultimately prove conclusive.
• At typing, spot USD/ZAR trades at 18.2326, around 2,400 pips below neutral levels, with bears looking for losses towards Jun 21 low of 17.8689. Bulls see the 50-EMA at 18.4646 as their initial target, followed by round figure/Jun 6 high of 19.0000/54.
• SAGB have turned bid, clawing back the bulk of yesterday's losses, in sync with the rand. The move lower in SAGB yields has pushed 5-year and 10-year breakeven inflation rates to 5.12% and 6.12% respectively.
• The composite BBG Commodity Index has added 0.5% this morning; precious metals are 0.3% better off.