International

The dollar was weaker yesterday. The use of the Johnson and Johnson vaccines was halted, and the dollar failed to benefit from a high US CPI print as it was already in line with expectations of accelerating inflation. US Treasury yields ticked lower in tandem following a good 30-year note auction, also tapering the impact of a high CPI print. The Fed has expressed the lack of concern with inflation, indicating likely overlooking higher prints before looking to increase interest rates, something investors have been largely considering. The dollar index touched a 3-week low of 91.801 before closing out the session at 91.845

The pound was down in the first half, knocked out by news of BoE chief economist Andy Haldane’s, resignation, and partly affected by J&J vaccine delays to touch the $1.3700 support level. It recoiled in the afternoon on the back of dollar weakness to only finish the day flat $1.3749

The euro rose against the dollar, benefitting from low US yields and high inflation, despite facing its own rising yield challenges. The euro managed to trade a high $1.1953, contending for the coveted $1.2000 psychological level if it maintains momentum. The single currency closed out the session firm at $1.1948

ZAR

The South African rand edged higher in its early activities on Tuesday, initial trading on the back foot, as broader risk aversion towards emerging markets dominated global markets, in anticipation of CPI Inflation numbers from the US, which saw the dollar gaining grounds in its early trades. Although late trades saw the local unit staging a recovery, recouping all its earlier losses to end the session firm, as the greenback, along with US yields slipped following the US’s Inflation print. The rand initially weakened to a high of R14.6823/$, before strengthening to end the session at R14.5233/$ on the day.

Mining production data came out better than expected yesterday, printing at 0.80% YoY, while the market was pricing in -2.80%

Today we are light on the data front, with the market expecting Retail Sales numbers locally, and internationally we have Industrial Production from the EU and Import Prices numbers from the US. The local unit will most likely continue to follow global 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.