ZAR: Rand Strengthens Into London Morning

Spot USD/ZAR sold off sharply into the European morning, despite a steady performance from the greenback (the BBDXY Index is marginally higher on the day). It seems that there has been little in the way of impactful domestic headlines behind the move, with the rate last dealing at 18.3503, around 1,030 pips below neutral levels. The initial bear trigger remains at Jun 21 low of 17.8689; bulls look for gains towards Jul 2 high of 18.6627.

• Positioning ahead of this week's major central bank meetings continues to feed into EM FX price action, with the BoJ decision eyed with particular attention, due to the yen's status as a popular funding currency for carry trades. Wells Fargo noted that EM carry trades could rebound if the BoJ signals a cautious stance on Wednesday, while the yen sold off sharply overnight as the two-day meeting got underway in Tokyo.
• Citi wrote that "the vote split after the last meeting suggests a convergence towards a more dovish stance" and they expect the rand to weaken before SARB cuts commence, which they believe will happen in September.
• The composite BBG Commodity Index is little changed on the day; the precious metals subindex sits 0.5% higher.
• SAGB yields are a tad firmer across the curve; 10-year breakeven rate last sits a touch lower at 5.81%.
• The National Treasury will release monthly budget data at 13:00BST/14:00SAST.