ZAR: Rand On Defensive Amid Softer Precious Metals, Eyes SARB Rate Decision
Local assets have largely shrugged off South African CPI data released this morning, as inflation printed only marginally below expectations, and it is not expected to have much impact on the SARB's rate decision later today. When this is being typed, USD/ZAR trades at 16.2435 and bullish focus falls on Aug 4 high of 16.5327. * Data from Statistics SA showed that price growth stagnated on sequential basis, while annual inflation picked up to +4.4% Y/Y in August from +4.3% prior. Core inflation eased off to +4.1% Y/Y from +4.2%, even as services inflation ticked higher (to +5.1% Y/Y from +5.0%). Goods inflation edged lower to +3.3% Y/Y from +3.4% prior. * Consensus continues to look for a 25bp interest-rate hike from the SARB later today, with the central bank under pressure to protect its new +3% Y/Y inflation objective introduced last year. The protracted nature of the external energy shock speaks in favour of a resumption of tightening after a surprise pause in July, although a hike is not a done deal. * Crude oil prices have edged higher this morning, but Brent has stayed below $100/bbl so far, with market participants eyeing updates on US-Iran talks. Meanwhile, precious metals
Local assets have largely shrugged off South African CPI data released this morning, as inflation printed only marginally below expectations, and it is not expected to have much impact on the SARB's rate decision later today. 5327. 3% prior. 0%).
4% prior. * Consensus continues to look for a 25bp interest-rate hike from the SARB later today, with the central bank under pressure to protect its new +3% Y/Y inflation objective introduced last year. The protracted nature of the external energy shock speaks in favour of a resumption of tightening after a surprise pause in July, although a hike is not a done deal. * Crude oil prices have edged higher this morning, but Brent has stayed below $100/bbl so far, with market participants eyeing updates on US-Iran talks.
Meanwhile, precious metals are on the back foot, with gold down $43/oz. and platinum down $42/oz. on the day. This may be keeping the rand under some pressure.
* In terms of background themes, US-SA diplomatic tensions continue to bubble, as the US ambassador launched a media offensive earlier this week to decry South Africa's lack of progress in addressing his country's demands. News24 ran a piece citing South African diplomats, who firmly pushed back against his allegations. * SAGB yields are mostly a tad firmer, likely in reaction to the uptick in oil prices, with the space awaiting the SARB's rate decision. A strong auction may have lent some support to the space yesterday.
50%, respectively, refreshing cyclical lows.