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Cape Town - The rand was on the front foot on Thursday, trading below R14.60/$ on better than expected inflation data released on Wednesday and as markets price in a "Bremain" vote.
On Wednesday the rand strengthened past 7-week highs as traders reacted positively to the latest consumer inflation data. But now all eyes are on today’s Brexit referendum, said NKC Africa Economics.
"The rand was definitely helped by much better inflation data yesterday and it looks like for the moment that the SA Reserve Bank won't have to put up rates in July.
"I think because the rand has strengthened since they put up rates at the beginning of the year and a lower trajectory on US rates is now forecast that they can avoid a hike," said Adam Phillips of Umkhulu Consulting in his morning report.
Stats SA on Wednesday announced a modest drop in consumer price inflation (CPI) of 0.1 of a percentage point in May to 6.1% from 6.2% in April.
On average, prices rose by 0.2% between April 2016 and May 2016.
The consensus forecast expected CPI to increase from 6.2% year-on-year in April to 6.4% in May.
The CPI has exceeded the Sarb’s 3% to 6% CPI target since January, mainly due to steep drought-induced food price inflation.
Phillips said against this backdrop it does look like the Sarb has done everything within its powers to assist Finance Minister Pravin Gordhan to uplift the ailing economy.
"I just think we need more positive news locally to help the currency back to the best levels we saw in April."
He sees the next support level for the rand at R14.45 against the greenback, but expressed concern over the political situation.
"I am now starting to concern myself with political issues here and a possible flare up in Greece that could have an effect on the euro."
On the Brexit vote later on Thursday, Phillips said he believes the UK will stay.
On Thursday stock markets were up in the Far East, along with the British pound rallying to a six-month high, as another poll favours the UK remaining in the EU.
The Brexit vote will start later on Thursday, possibly after the SA market closes.
NKC's expected trading range for Thursday is R15.40/$ - R15.80/$.
