International

 The dollar was weaker yesterday, with the dollar index struggling to remain buoyant despite a fair US Treasury note auction yesterday that saw yields tick slightly higher. Investors await key US inflation data expected out today where a higher print will likely see the dollar strengthen, supporting the narrative. The dollar index saw a low 92.012 and ended the session at 92.104.

The euro saw marginal gains on the back of dollar weakness on the day, but kept within a tight range in late session trade as any support from the domestic front is limited due to weak Eurozone fundamentals, and may remain so in the short-term if US CPI data out today prints above expectations. The single currency traded a high of $1.1918 and ended the session at $1.1909.

The pound rebounded yesterday to trade a high of $1.3775 mid-afternoon. England lifted its 3-month lockdown restrictions, and recent post-Brexit frictions over Northern Ireland may soon see resolution as discussions are underway, allowing positive sentiment to permeate through the market. The pound closed the day firm at $1.3742.

ZAR

The South African rand kick start the week trading on the back foot for the better part of the session on Monday, as the country’s growth outlook, along with concerns over US inflation kept demand for EM’s subdued. Although late trades saw the local unit getting lifted, pulling back from the day’s high and consolidating its losses to end the session firm, despite discouraging growth prospects. It was predominantly dollar weakness that saw sentiment returning in certain EM’s towards the end of the session. The rand rose to a high of R14.6644/$ before retracing to a low of R14.5384/$ and ultimately ending the session at R14.5651/$ on the day.

Today we are a little heavy on the data cards. Locally we have Mining Production data, which previously printed -6.20% YoY. Internationally we have GDP Estimates, Industrial Output and Manufacturing Output from the UK, and CPI Inflation data from the US. The market is most likely going to be tracking the US inflation numbers closely today, to get some sense of direction. The rand will continue to take direction from international trends and other market-moving events.

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 dollar kicked off the week to a great start as risk sentiment shifted to the cautious side due to mounting concerns over hedge fund defaults, sending investors to havens. Upbeat US economic data as well as the COVID-19 vaccine rollout across the US being on track, or possibly even ahead of schedule, aided the greenback in its surge forward, allowing the dollar index to reach a high of 92.964 and ended the session at 92.944.

The euro pulled back and reversed the gains made last Friday due to declining risk sentiment and dollar strength, while concerns over the economic impact of a third wave of COVID-19 infections, and similarly lockdown restrictions, added fuel to the fire. The single currency traded at a low of $1.1761 just before ending the session at $1.1764.

The pound continues to show its resilience and maintains its position as the best performing G10 currency for the year as it surged forward in early trade. Most of the recent gains for pound sterling can be attributed to the faster vaccine rollout across the UK, with a total of 30 million adults already vaccinated. This despite the EU trying to cause a vaccine war with the UK, with Brussels threatening to stop the export of doses to Britain.  The pound rose to a high of $1.3847, before falling to a low of $1.3756 and ended the day only marginally in the red at $1.3763.

ZAR

The rand was range-bound for the better part of the day yesterday, teetering around R15.00/$ before picking a side and recovering against the dollar, despite increased dollar demand. The rand remains sensitive to US inflation speculative views that have caused the rand’s uncertain nature. Our local unit strengthened to R14.7835/$ and ended the session at R14.9117/$.

We look forward to German inflation and US consumer confidence data out today to influence EM currency direction 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.