The dollar lost last week’s steam on Monday to trade lower against rivals. Bond yields retreated as investors ran to safe US debt due to Turkish uncertainty, negatively affecting the dollar as higher yields offered support. Investors await Fed Chair Jerome Powell and Treasury Secretary Janet Yellen’s testimonies this Tuesday and Wednesday over recent US market events hoping for further clarity on the Fed’s monetary policy stance, but they are likely to hear the same iteration of the Fed doing what is needed to support the US economy as it tries to lift itself following a period of weakness due to the pandemic. The dollar index reached a low 91.712 and ended Monday’s session at 91.798.
The euro had a strong moment yesterday on the back of the dollar’s decline, but it may be short-lived as euro sentiment is hampered by persisting lockdown restrictions in the bloc’s largest economy, Germany, and lingering risks of rising bond yields. The single currency strengthened to $1.1946 and ended the session at $1.1904.
The pound was weaker in early session trade, relinquishing last week’s gains on the back of a fading post-Brexit glow and issues with its vaccine rollout. Tensions over export bans and the possibility of EU-manufactured AstraZeneca’s vaccine not reaching UK shores has investors holding back. The pound weakened to $1.3817 in the start of the day, was lifted up to $1.3875 midday, and ended the session at $1.3870.
The Rand managed to remain strong over the long weekend, pushing slightly stronger in Friday’s subdued trading day and managing to close at almost the same level during yesterday’s public holiday, despite a brief spike to just below R15.00/$. The Rand reached a high of R14.9548/$ yesterday before ending the session at R14.7189/$.
Within the short work week ahead, there is no shortage of local data and events to drive the currency. Tomorrow marks the release of February CPI data, with consensus expecting a print at the very bottom edge of the SARB’s inflation targeting bracket. The release is the day before the SARB’s Monetary Policy Committee meets to decide the rates policy going forward – while we are expecting inflation prints at the lower end of the bracket, the SARB is likely to keep rates on hold.
On the day ahead, the data card is fairly empty, with unemployment figures from the UK being the most important of the small bunch. We expect the Rand to adopt a muted approach leading up to the SARB’s decision, much like other currencies have done before their central bank decision, barring any major headlines.