The USD/ZAR currency pair, known for its high volatility, has been unusually calm, catching the attention of economists at ING who assess the pair’s outlook ahead of the South African annual budget.
The imminent challenge for South Africa’s Finance Minister, Enoch Godongwana, is navigating pre-election budget considerations. The task involves striking a balance between providing pre-election giveaways and demonstrating a commitment to stabilizing South Africa’s debt-to-GDP trajectory, projected to be around 78% in 2025/26 amid weak economic growth. A crucial focus for FX markets is whether the government will access the South African Reserve Bank’s contingency fund for spending plans, a move that could trigger a significant upside breakout in USD/ZAR.
The recent USD/ZAR close above its 20-day Bollinger Band at 19.14, a tool used in technical analysis to identify breakouts from low volatility regimes, suggests that the South African Rand may face considerable challenges in the coming month. Analysts caution that this could signify potential trouble for the Rand, hinting at the possibility of a breakout in the USD/ZAR pair.
