International

The US dollar index retreated on Monday, relinquishing almost half of its previous session’s gains to kick start the week. Disappointing economic data, along with falling US Treasury yields dragged the greenback lower on the day. The dollar index slipped to a low of  90.867 before ending the session at 90.945.

The euro came off its recent lows, clawing back part of yesterday’s losses, as the greenback was predominantly offered. The single currency’s rally was also aided by economic data, along with comments from the ECB’s vice president regarding the gradual phasing out of stimulus measures, on the back of a successful vaccine program. The euro rose to a high of $1.2075 before ending the session at $1.2063.

The pound sterling was amongst the biggest winners on the day, following a heavy blow in the previous session. Pound Sterling rallied on the back of poor economic data from other regions, with a predominantly weaker dollar also making it easy for the pound. The British pound rose to a high of $1.3931 before ending the session at $1.3908.

ZAR

The rand found a bit of reprieve yesterday, recouping some gains, despite underwhelming local manufacturing PMI data, as disappointing US economic data lifted EM currencies. The rand strengthened to R14.3629/$ and ended the session at R14.3913/$.

From a local perspective, some attention will be turning to Moody’s credit rating review release for South Africa this Friday evening. The local economy has made a valiant effort at picking itself up following the last credit rating downgrade to junk status, with economic data prints signaling a slow recovery. A lot is weighing on the economy, especially from a fiscal standpoint, but it is uncertain at this point what the review’s outcome will be.

Focus today shifts to global events, with no local economic events anticipated.

This communication (“this communication”) has been provided by the corporate and investment banking division of Absa Bank Limited a registered bank in the Republic of South Africa, a subsidiary of Absa Group Limited, with company registration number: 1986/004794/06 and with its registered office at: Absa Towers East, 3rd Floor, 170 Main Street, Absa Towers West, 15 Troye Street, Johannesburg 2001, Republic of South Africa (“Absa”). Absa is regulated by the South African Reserve Bank. Absa has provided this communication for information purposes only and you must not regard this as a prospectus for any security or financial product or transaction. This communication is from an Absa Sales and/or Trading desk and is not a product of the Absa Research department. This communication has not been produced, reviewed or approved by the Absa Research Department, and is not subject to any prohibition on dealing ahead of the dissemination of research. The views in this communication are not a personal recommendation and do not take into account whether any product or transaction is suitable for any particular investor. This message is subject to the terms and conditions at: http://www.absa.co.za/disclaimer. This communication is confidential and no part of it may be reproduced, distributed or transmitted without the prior written permission of Absa.

International

The US dollar continued on its path to recovery yesterday, almost getting back to where it was before Monday’s big fall. Recent strength on the greenback stems from risk off sentiment in markets as well as better than expected jobless claims data yesterday, indicating a recovery in the US jobs market. President Biden’s new capital gains tax proposal also aided the dollar in late afternoon trade yesterday. The dollar index reached a high of 91.419 ended the session at 91.333.

The euro fell during yesterday’s session as a result of a stronger dollar. Before the turnaround in late afternoon, the common currency had initially strengthened ahead of, and after the ECB’s policy decision where they decided to keep rates on hold. Although the euro briefly dipped below $1.2000 and reached a low of $1.1994, it pulled back and closed the day at $1.2015.

What goes up, must come down and yesterday Pound Sterling proved this as it successfully wiped the large gains made on Tuesday from the board. Where the stronger dollar was the initial driver of the move lower, it was the diminishing advantage that the UK has on vaccine rollouts that added to the decline as Europe catches up with faster rollouts and additional doses. The pound reached a low of $1.3824 and ended the day at $1.3839.

ZAR

The rand saw marginal declines yesterday, retreating to trade above R14.30/$ as delays in global vaccine distribution has uncertainties creeping back into the market. With significant currency moves on the back of yields, investors still await direction from major economies as interest rates continue to take focus, despite the ECB keeping rates unchanged last night. The rand closed us off just shy of R14.30/$ and R14.2941/$.

With no local economic events out today, expect global factors to drive market today.

This communication (“this communication”) has been provided by the corporate and investment banking division of Absa Bank Limited a registered bank in the Republic of South Africa, a subsidiary of Absa Group Limited, with company registration number: 1986/004794/06 and with its registered office at: Absa Towers East, 3rd Floor, 170 Main Street, Absa Towers West, 15 Troye Street, Johannesburg 2001, Republic of South Africa (“Absa”). Absa is regulated by the South African Reserve Bank. Absa has provided this communication for information purposes only and you must not regard this as a prospectus for any security or financial product or transaction. This communication is from an Absa Sales and/or Trading desk and is not a product of the Absa Research department. This communication has not been produced, reviewed or approved by the Absa Research Department, and is not subject to any prohibition on dealing ahead of the dissemination of research. The views in this communication are not a personal recommendation and do not take into account whether any product or transaction is suitable for any particular investor. This message is subject to the terms and conditions at: http://www.absa.co.za/disclaimer. This communication is confidential and no part of it may be reproduced, distributed or transmitted without the prior written permission of Absa.