RAND TALKING POINTS
- Rand unphased by South African inflation beat.
- USD/ZAR regular as focus shifts to Jackson Hole.
- Commodities outlook might assist suppress greenback power.
USD/ZAR FUNDAMENTAL BACKDROP
The South African rand has been comparatively quiet this week regardless of some unstable durations scattered all through. Earlier this morning we noticed South African inflation figures (see financial calendar beneath) shock to the upside, beating estimates throughout the board together with each core and headline figures respectively. The 7.8% headline quantity marks the best situation in 13 years (since 2009). According to Statistics South Africa (Stats SA) the principle contributors to the upper print embrace the beneath non-durable items:
USD/ZAR ECONOMIC CALENDAR
Source: DailyFX Economic Calendar
Source: Stats SA
What this implies for the rand is that there’s larger potential for the South African Reserve Bank (SARB) to proceed the mountain climbing cycle to quell inflationary pressures. From a U.S. greenback perspective, a hawkish slant from Fed Chair Jerome Powell within the upcoming Jackson Hole Economic Symposium may add to a extra aggressive SARB as a stronger USD will solely heighten inflation considerations. The SARB is in a difficult scenario as the present weak financial backdrop is not going to profit from increased rates of interest notably from a shopper perspective which has already begun with in the present day’s trade union strike motion (nationwide shutdown).
On a extra optimistic word, China’s price cuts on each short-term (1Y) and long-term (5Y) mortgage prime charges to advertise financial development and ease mortgage reimbursement considerations may result in a stronger rand. South African exports could also be positively impacted by this strategy from the Chinese authorities by the use of increased commodity costs (iron ore, platinum, coal and gold).
Europeans are heading into the winter months and the demand for coal is just set to develop after sanctions on Russian power stay in place. We have already seen the rand profit from the added demand and will assist negate/curb vital greenback power.
USD/ZAR DAILY CHART
Chart ready by Warren Venketas, IG
Price motion on the USD/ZAR day by day chart displays market hesitancy this week with a rectangular sample growing across the psychological17.0000 help zone. The Relative Strength Index (RSI) now approaches overbought territory however has some technique to go by way of RSI trendline resistance (crimson) which can enable for additional rand weak point in direction of the 17.3074 swing excessive relying on the end result at Jackson Hole. This being mentioned, the distinction between the USD/ZAR spot value and the 200-SMA (gray) is kind of stretched and may even see a push decrease as imply reversion takes maintain.
Contact and comply with Warren on Twitter: @WVenketas