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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.
ZAR
Market pricing of looser monetary policy (evidenced by 3x6 FRAs hitting multi-year lows at end-August) has coincided with a solid year-to-date ZAR rally (chart below). ZAR’s YTD spot gains vs the USD exceed that of all other major EMEA FX at +4.1%. This atypical relationship highlights the increasingly important role of structural supply-side improvements in reducing South Africa's risk premia, as opposed to the more conventional relationship of easier policy being associated with weaker FX.
- Fading concerns of an EFF coalition and continued fiscal consolidation underline the post-election optimism, but Eskom's effective turn around in power generation is a particular driver, reversing the impact of record outages last year. The CEO sees no resumption of blackouts in the coming months, barring exceptional circumstances.
- Gold reaching record highs has underpinned ZAR outperformance, while high-frequency data has shrugged off now historic risks stemming from political uncertainty over the election period (Absa Manu. PMI rebounded to 52.5 in July from 43.8 in May).
- Against this backdrop, SARB comms are sounding increasingly more optimistic. Deputy Governor Cassim stated “There’s a growth side and there’s an inflation side; there may be a double whammy, there may be a good story here.” Kganyago said “If we deal with these structural constraints, we can lift our GDP growth potential to 3.5%.”
- The SARB voted 4-2 in favour of a hold at 8.25% in July (against broad consensus of a 5-1 split). The next meeting comes just one day after the Sept FOMC, at which the beginning of an easing cycle could provide room for the SARB to adjust rates for the first time in over a year.
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.
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