ZAR

The rand continued to trade weaker yesterday as part of a major EM sell-off as investors chase dollar gains and investment-grade debt. Although current weak conditions are forecast to persist as US Treasury yields rise, overall positive global recovery sentiment is expected to curb losses as the world economy attempts to normalize. Our local unit weakened to R15.5639/$, and ended the session at R15.5326/$

EM currencies are feeling the brunt of a dollar hell bent on biting back hard. An expectation of a quicker US economic recovery saw the rand trading a new two-month low, teasing the R15.60/$ level last traded in early January, with recent rand gains from vaccine optimism and rollout having greatly eroded. It may take a significant event to shift sentiment, as the rest of the week’s local data releases are expected to have little impact if positive as the rand remains largely influenced by global factors.

We look forward to 2020 Q4 domestic GDP data set to be released just before mid-day today. Reuters poll forecasts the QoQ figure at 5%, and the YoY figure at -4.6%, both indicating recovery in the last quarter of 2020 while South Africa was finding its bearings while facing its second wave of COVID-19.

Expected ranges for the day:

• USDZAR: R15.4000 to 15.5500/$
• EURUSD: $1.1815 to $1.1890
• GBPUSD: $1.3800 to $1.3875

International 

The dollar extended gains during yesterday’s session as the world currency climbs along with its treasury yields. The dollar rally has been aided by an uptick in the US economy, with promising signs of growth as well as increased employment figures. The dollar index reached a high of 92.421 before ending the session at 92.313.

The Euro remains hard-beat by the greenback, suffering another day of losses yesterday. The common currency is one of the hardest hit currencies vs the dollar and has also lacked data over the last few trading sessions to hold its own, perhaps today things could turn with the release of Eurozone GDP. The euro reached a low of $1.1844 and ended the session at $1.1847.

Pound Sterling experienced only a slight decline yesterday, demonstrating once again its strength and resilience over the last few sessions. Bank of England Governor, Andrew Bailey, commented yesterday that the BOE is preparing for negative rates at this stage but does not intend on using them just yet. Bailey also signalled that while the risks on a COVID recovery remain on the downside, as time goes by, so do these risks dissipate. The pound fell to a low of $1.3800 and ended the session at $1.3824.

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