USDZAR Modestly Lower as South African Reserve Bank Holds Rates
In a vote which had 3 members voting for a rate hold and 2 members voting for a 25bps cut, the SARB voted to keep rates on hold.
Lower inflation appears to be the main reason for the decision, as food price inflation continued to surprise to the downside and was expected to peak at 6.1% in 2020. The bank also revised core inflation to 4.2% in 2019 and 4.5% in 2020, down from previous forecasts of 4.3% and 4.7% in 2019 and 2020 respectively. The SARB kept its previous 2021 inflation estimate intact at 4.6%.
The South African Reserve Bank also revised GDP growth downwards. The forecast of GDP growth for 2019 was revised lower from 0.6% to 0.5%. The forecasts for 2020 and 2021 were also reduced from 1.5% to 1.4% (2020) and from 1.8% to 1.7% (2021).
The USDZAR is trading lower on the decision, and is now challenging the lower border of the symmetrical triangle. As I indicated yesterday in my preview of this economic event, the ZAR is gaining strength from the rate hold and this move is a fulfillment of the prediction.
A decisive close below the symmetrical triangle’s lower border opens the door to the 13 September and 28 October lows of 14.5448 as the initial downside target. The previous highs of July 5 and 30 at 14.2837 could also come into focus.
On the flip side, 14.9928 is an upside target if the downside move falters. Price would need to break above the upper border of the triangle for this to happen.More content