FxWirePro: Can SARB maintain status quo? Uphold optionality for USD/ZAR hedging

Yesterday's South African inflation data for March showed an increase in inflation, but the data remained slightly below expectations. The overall rate climbed from 4.1% to 4.5% (consensus: 4.6%). The main drivers were higher oil prices, but fruit and vegetables were also significantly more expensive in both the previous month and the previous year. The core rate excluding energy and food prices remained stable at 4.4% for the fifth consecutive month. 

In the wake of tax increases and rising administered electricity prices, the South African central bank expects the overall inflation rate to rise to 5.7% by the first quarter of 2020, before stabilizing at 4.5% at the end of 2021. 

In its Monetary Policy Review, also published yesterday, it stated that it was too early to give the all-clear on the inflation front. We expect the SARB to keep its key interest rate stable until further notice. 

The rand was unimpressed by the data, USDZAR remained above the 14 mark in an EM-friendly environment.

We now quickly run you through the EMEA FX GBI-EM Model portfolio. Medium weights in the region holding OW PLN vs UW CZK after moving MW RON (from UW) are advised. While we activate a bullish USDZAR put spread for a potential China/global growth stabilization. Courtesy: Commerzbank

Currency Strength Index: FxWirePro's hourly USD spot index has bearish index is creeping at 116 (bullish) while articulating (at 13:48 GMT). 

For more details on the index, please refer below weblink: http://www.fxwirepro.com/currencyindex