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ZAR: USDZAR Hits Fresh Multi-Month Low Pre-Fed, Key Support at 17.4193 in Focus

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With USDZAR price action continuing to reflect moves in the broader USD index, pre-Fed greenback weakness has prompted an extension lower for the pair, while the local CPI release has done little to shift the narrative ahead of the FOMC decision tonight and the SARB meeting tomorrow. USDZAR hit a low of 17.5355 at the start of European trade, the lowest level for the pair since July 2023, narrowing the gap to key support at 17.4193, the Jul 27 2023 low.

  • Headline inflation cooled to +4.4% Y/Y in August, the lowest level since April 2021, against expectations for a return to the SARB's target mid-point of +4.5%. Core inflation was also lower than forecast, coming in at +4.1% Y/Y versus +4.2% expected. The data support the case for a rate cut tomorrow, and should the Fed opt for a 50bp cut to start its easing cycle, this would provide greater room for manoeuvre. Our full SARB preview can be found here.
  • Evidence of success in South Africa’s structural reforms has also underpinned the ZAR’s strong showing this month. Fitch Ratings noted yesterday that recent reductions in the frequency and severity of power cuts should ease downward pressures on supply-side potential growth. Meanwhile, the relatively smooth transition to the GNU has also helped reduce the nation’s risk premium.
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With USDZAR price action continuing to reflect moves in the broader USD index, pre-Fed greenback weakness has prompted an extension lower for the pair, while the local CPI release has done little to shift the narrative ahead of the FOMC decision tonight and the SARB meeting tomorrow. USDZAR hit a low of 17.5355 at the start of European trade, the lowest level for the pair since July 2023, narrowing the gap to key support at 17.4193, the Jul 27 2023 low.

  • Headline inflation cooled to +4.4% Y/Y in August, the lowest level since April 2021, against expectations for a return to the SARB's target mid-point of +4.5%. Core inflation was also lower than forecast, coming in at +4.1% Y/Y versus +4.2% expected. The data support the case for a rate cut tomorrow, and should the Fed opt for a 50bp cut to start its easing cycle, this would provide greater room for manoeuvre. Our full SARB preview can be found here.
  • Evidence of success in South Africa’s structural reforms has also underpinned the ZAR’s strong showing this month. Fitch Ratings noted yesterday that recent reductions in the frequency and severity of power cuts should ease downward pressures on supply-side potential growth. Meanwhile, the relatively smooth transition to the GNU has also helped reduce the nation’s risk premium.