USD/ZAR: Rand slips to 6-week low ahead of CPI data, FOMC decision

The South African Rand was a notch weaker against the US Dollar on Monday, with the emerging market currency set to extend a 1.76% loss from last week ahead of key macro data.

Market focus now sets on the US CPI inflation figures, due out on Tuesday, which may provide more clues over potential interest rate cuts by the Fed.

Annual consumer inflation is expected to have slowed further in November, to 3.1%, according to market consensus. And, annual core CPI inflation is expected to have remained steady at 4% in November.

The inflation report precedes the Federal Open Market Committee (FOMC) policy decision, expected on Wednesday. The Federal Reserve is largely expected to keep the target range for the federal funds rate intact at a 22-year high of 5.25%-5.50% at its last policy meeting for the year.

“The big influence on the U.S. dollar this week is going to be the FOMC meeting, in particular Chair (Jerome) Powell’s comments at his press conference,” Joseph Capurso, head of international and sustainable economics at Commonwealth Bank of Australia, was quoted as saying by Reuters.

“If he’s (hawkish), I think markets will probably ignore him and the U.S. dollar remains steady. But if he’s dovish, then I think the U.S. dollar and bond yields will fall, so it’s an asymmetric reaction.”

Meanwhile, Rand traders will be also paying attention to local consumer inflation numbers for November, due out on Wednesday.

South Africa’s annual CPI inflation accelerated for a third consecutive month in October, to 5.9%, or the highest level since May. The latest inflation reading also stood close to the upper limit of the South African Reserve Bank’s inflation target range of 3%-6%.

As of 8:17 GMT on Monday USD/ZAR was gaining 0.65% to trade at 19.0615. Earlier in the session, the exotic Forex pair went up as high as 19.0690. The latter has been the pair’s strongest level since October 26th (19.2710).