International

The US dollar index struggled for direction yesterday, lacking some sense of conviction and trading the better part of the session sideways.  Although the greenback had a less volatile session on Wednesday, as the market was eyeing the jobs data, the dollar still managed to trade above its recent high. The US dollar index rose to a high of 91.436 before consolidating to end the session slightly firm at 91.308.

The euro continued on its downtrend yesterday, trading at a two-week low in the session. The single currency continues to show some vulnerabilities, with downside risk very much prevalent. The common currency slipped further to a low of $1.1986 before ending the session at $1.2002.

The pound sterling refused to fall victim to the dollar, staging a smooth recovery ahead of the Bank of England’s rate decision. The BoE will be delivering its decision on the benchmark interest rates later on today, and according to the Reuters Poll, they are expected to leave rates unchanged. The cable rose to a high of $1.3925 before ending the session at $1.3911.

ZAR

The rand has been steadily see-sawing this week, recouping gains yesterday following Tuesday’s test of R14.50/$ to trade under the R14.40/$ mark from midday throughout as a weak dollar, as well as the suspension of corruption-charged top official, Ace Magashule, lent support. The rand strengthened to R14.3375/$ and closed us out at R14.3617/$.

Investors are going to keep a close eye on local political updates as the suspension of Ace Magashule bodes well for sentiment, it being a step in the right direction to chastise and curb corruption in the ruling party. Friday’s Moody’s credit review will also weigh on us this week, as the negative outlook from the last review leaves a lot of room for further downgrade.

Today’s event calendar sees nothing out from the local front, so we anticipate global factors to also contribute to sentiment.

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.

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