USD/ZAR Price News: South African Rand drops to 19.30 ahead of SARB Interest Rate Decision

• USD/ZAR picks up bids to refresh intraday high, extends previous day’s rebound towards record high.
• Fears of US default, mixed Fed concerns favor US Dollar bulls.
• SARB is expected to announce 0.25% rate hike, recently easy South African inflation teases Rand sellers.
• Multiple US data, risk catalysts eyed for clear directions as ZAR braces for fresh all-time low.

USD/ZAR renews its intraday high near 19.30 as it rises for the second consecutive day amid broad US Dollar strength on early Thursday. In doing so, the South African Rand (ZAR) pair prepares for today’s South African Reserve Bank (SARB) Interest Rate Announcements amid recent easy prints of the inflation at home.

On Wednesday, South Africa’s Consumer Price Index (CPI) for April eased to 6.8% YoY and 0.4% MoM versus 7.1% and 1.0% respective priors. The same challenges the SARB from being hawkish in today’s monetary policy announcements even if the South African central bank is all set for a 0.25% rate hike.

Even so, Goldman Sachs’ Andrew Matheny said, per Reuters, “The April CPI print was considerably more benign than in recent months. However, we think that the downside surprise is unlikely to have much bearing on the MPC decision tomorrow... given that, in our view, the SARB is mostly reacting to exchange rate weakness.”

On the other hand, the US Dollar Index (DXY) rises to a fresh high in seven weeks, to 104.05 by the press time, amid the US policymaker’s inability to deliver a debt ceiling extension deal and the looming long weekend for the House Representatives. With this, global rating agencies like Fitch and Moody’s turn cautious about the US credit rating status. Recently, the US Treasury Department accepted the rating agencies’ fears.

It should be noted that the Minutes of the latest Federal Open Market Committee (FOMC) Meeting suggested that the policymakers aren’t on the same table. Even so, Atlanta Fed President Raphael Bostic said, “‘We’re right at the beginning of the hard part’ of taming inflation.” On the same line, Federal Reserve Governor Christopher Waller mentioned that he doesn’t support stopping rate hikes unless getting clear evidence that inflation is moving down toward the 2% objective.

Amid these plays, the S&P500 Futures snap a two-day downtrend by bouncing off a two-week low to 4,138 by the press time, up 0.39% intraday at the latest. On the other hand, the US 10-year and two-year Treasury bond yields remain firmer at the highest levels since mid-March, close to 3.75% and 4.40% as we write.

Looking forward, the SARB Interest Rate Decision is the key for the USD/ZAR pair and can allow the buyers to challenge the all-time high marked the last week if offering a dovish hike. Following that, the US weekly Jobless Claims, the Chicago Fed National Activity Index and Pending Home Sales will decorate the calendar but the debt ceiling talks will be crucial to watch for clear directions.

Technical analysis

A two-week-old ascending triangle formation restricts immediate USD/ZAR moves between 19.53 and 19.15.