The South African Rand gained against the US Dollar on Thursday ahead of local manufacturing data and a highly anticipated US CPI inflation report that could affect Federal Reserve’s rate outlook.
Annual core consumer price inflation is expected to have slowed further in December, to 3.8%, according to market consensus, from 4% in November.
A soft CPI inflation reading could bolster investor rate cut bets for March. There is a 66% chance of a Fed rate cut currently priced, according to the CME’s FedWatch tool.
“An upside surprise to the CPI could lift the US dollar as well as US Treasury yields but we reckon bullish reversals will not last very long,” analysts at Maybank said in a client note.
Meanwhile, Rand traders are now expecting the November data on South African manufacturing output due to be released at 11:00 GMT today.
Manufacturing production in South Africa surged 2.1% year-on-year in October, while rebounding from a revised down 4.1% contraction in September.
Market consensus points to a 1.9% YoY growth in manufacturing output in November.
As of 9:39 GMT on Thursday USD/ZAR was edging down 0.33% to trade at 18.6283. The exotic Forex pair has pulled back from a three-week high of 18.9564, which it registered on January 5th.
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