The USD/ZAR exchange rate drifted upwards on Wednesday as traders focused on the latest South African inflation data and Federal Reserve minutes. The pair rose to a high of 18.72, higher than this month’s low of 18.12.
South Africa inflation dataThe USD/ZAR pair drifted upwards after the latest South Africa consumer inflation data. According to the statistics agency, the headline Consumer Price Index (CPI) data rose from 0.6% in September to 0.9% in October. This increase translated to a YoY jump of 5.9%, higher than the previous 5.4%.
These two numbers were higher than the median estimates of 0.5% and 5.5%, respectively. Further data revealed that the core inflation, which excludes the volatile food and energy products, rose from 0.2% to 0.4% on a MoM basis. It slipped from 4.5% to 4.4% on a YoY basis.
These numbers mean that South Africa’s inflation will remain stickier for longer. While it is still inside the central bank’s target range, there is a likelihood that the bank could decide to hike rates again. Most economists expect the bank will leave rates unchanged at 8.25% in its Thursday’s meeting. In a note, an analyst told Bloomberg:
“Inflation will still slow after the new year. But the higher starting point is relevant for the inflation trajectory. This will not allow the SARB to sound dovish any time soon, and certainly not tomorrow.”
The USD/ZAR pair rose after the relatively muted Federal Reserve minutes. The minutes showed that the bank was still committed to fighting inflation, which has remained above its 2% target for the month.
Still, most committee members supported a cautious view of future rate hikes. As a result, most analysts believe that the Fed is done hiking for now. Besides, data published this month revealed that the unemployment rate rose to 3.9% in October while inflation dropped to 3.2%.
USD/ZAR forecast
The daily chart shows that the USD to ZAR exchange rate has come under pressure in the past few days. It has slipped by almost 5% from the highest point this year. Along the way, the pair has formed a head and shoulders pattern, which is a bearish sign.
The pair is also consolidating at the 25-day and 50-day Exponential Moving Averages. It remains below the 100-day EMA. Therefore, the outlook for the USD/ZAR pair is bearish, with the next point to watch being the psychological level at 18.00.
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