USD/ZAR scales 1 1/2-week peak ahead of US data deluge

The USD/ZAR currency pair traded near a fresh 1 1/2-week peak of 17.9767 on Tuesday ahead of a series of high-tier US macro data this week, including the Non-Farm Payrolls report, which could affect the size of an interest rate cut by the Federal Reserve in September.

The US job openings data on Wednesday and the initial jobless claims data on Thursday will also be closely watched.

Employers in all sectors of the US economy, excluding farming, probably added 163,000 job positions in August, according to market consensus, following a job growth of 114,000 in July.

“If the data remains robust, a 25 bps cut is more likely. However, a weak non-farm payrolls, particularly if it falls below 130,000 with another jump higher in unemployment rate, could push the rates market closer to pricing a 50 bps cut,” Charu Chanana, head of currency strategy at Saxo, was quoted as saying by Reuters.

Markets are now pricing in about a 31% chance of a 50 basis point Fed rate cut this month and a 69% chance of a 25 basis point rate cut.

Still, markets continued to price in 100 basis points of Fed rate cuts by the end of this year.

Meanwhile, in South Africa, data showed that the economy had expanded 0.4% quarter-on-quarter in Q2, following a revised zero growth in the first quarter.

The country experienced no load-shedding throughout the second quarter for the first time in years.

Load-shedding (power cuts) has hindered South Africa’s economic growth for more than a decade, with outages being on a record 335 days in 2023.

In annual terms, South Africa’s GDP grew 0.3% in Q2.

As of 10:59 GMT on Tuesday the USD/ZAR currency pair was gaining 1.02% to trade at 17.9751.