International

The dollar steady on its bearish trend, weakening against rivals, as the Fed reiterated its policy stance on keeping interest rates low following Tuesday’s CPI print. If the dollar maintains momentum, we could potentially see it retrace recovery gains and trade even weaker. We look forward to US retails sales data out today to influence sentiment. The dollar index reached a low 91.574 and ended the session at 91.648.

Dollar bears may to be showing a bias to pound sterling. The pound traded a high $1.3807 in the morning, benefitting from the UK’s vaccination initiative progress to use two different vaccines in its two-dose inoculations, also ticking higher on the back of the greenback’s losses on the day. The pound closed out firm at $1.3774.

The euro traded firm against the dollar intraday, with the day’s high just shy of the $1.2000 psychological level at $1.1987. The single currency has managed to bounce back 2% against the dollar this month, with major support from decreasing US Treasury yields. Weak fundamentals and issues with its vaccine rollout pose a major down-side risk, but sentiment is positive at the moment. The euro closed out firm at $1.1978.

ZAR

The South African rand opened the session slightly firm on Wednesday, channelling the previous session’s momentum, although the local unit was almost derailed by investor’s caution given the recent US inflation print and setbacks pertaining to our vaccine program. Improving risk sentiment in global markets, extended dollar weakness, along with better than expected domestic Retail Sales print, saw the rand rallying to its strongest level for the year, and also eying the R14.3500/$ mark. The local unit fell to a low of R14.3625/$ before ending the session at R14.3872 on the day.

Domestic Retail Sales numbers came out better than expected yesterday, printing at 2.3% YoY compared to the Reuters Poll of -1.8% and its previous print of -3.5%.

We are slightly heavy on the data front today, with investors expecting Retail Sales, Industrial Production, and Jobless Claims data from the US amongst others, and CPI Inflation data from Germany and Italy. With no domestic data expected today, the local unit will most likely continue to follow global trends and other market-moving events.

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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.