A relatively quiet start to the week in terms of market-moving data and events allowed the ZAR to recover sharply. The local currency led its EM peers higher in a broad-based rebound from the drop set off by Donald Trump’s US election victory. The rand, of course, got a boost from S&P Global’s decision to raise South Africa’s credit rating outlook from neutral to positive ahead of the weekend, which signalled a potential upgrade should the GNU follow through with its reform proposals. This development reminded markets that SA’s risk profile is improving relative to many of its EM counterparts, which should bolster the rand’s resilience somewhat in the months ahead.
Looking at the session ahead, it is another quiet day in terms of local data. The international card will be headlined by the final Eurozone CPI print for October, which will likely confirm a slight increase in inflation throughout the month. The final print offers much more granularity on the drivers of price pressures in the Eurozone, and generally there is a strong case for Eurozone rate cuts in the coming months. Notwithstanding new risks stemming from potential US tariffs, the Eurozone’s weak economic growth trajectory means that ECB policymakers are more concerned that restrictive monetary policy is not the way to go. This suggests rates need to be cut further.