Morning Wrap

The ZAR gained more than 2% to reach 18.3600 after Non-farm payrolls printed lower than expected.  

The local unit, opening weaker as traders turn attention to Thursday’s US CPI report.

• On Friday, the Dollar rally stalling after US yields dropped sharply to reach 4.06%. 
  • Payrolls lower, but Wages higher as well as a drop in unemployment to 3.5%, remains supportive of the Dollar.
• This week is dominated by US inflation data due on Thursday and it will likely set the next directional leg for the Dollar.  
  • US inflation expected at 3.3% YOY vs 3% previous.
    • Analysts citing a removal of the base effects as well an increase in energy and food prices.
    • A higher number will likely send the Dollar higher, removing any chances of a Fed pause/cut later in the year.
    • If any it would support further Fed hikes.
       
• We expect the ZAR to consolidate around the 18.5000 level, after the benign NFP report, with a risk of further weakening if US inflation prints higher.
   
• Trade :  BUY USDZAR on DIPS