USD/ZAR Outlook:
Bearish, as the rate is below its recent average and near recent lows due to weak economic indicators from the U.S.
Key drivers:
• Rate gap: The U.S. Federal Reserve’s decision to hold interest rates steady contrasts with South Africa's high interest rates aimed at controlling inflation, contributing to a weaker USD.
• Risk/commodities: Oil prices have surged, benefiting the ZAR due to South Africa's strong ties to commodity exports including coal and iron ore.
• One macro factor: Recent political stability in South Africa, driven by the formation of a centrist government, has improved investor confidence in the rand.
Range:
The USD/ZAR is likely to drift within its recent range, demonstrating volatility but remaining susceptible to downward pressures.
What could change it:
• Upside risk: A significant improvement in U.S. economic data could boost the dollar.
• Downside risk: Continued geopolitical tension impacting investor confidence in the U.S. could further weaken the dollar.
