The dollar strengthened in early session trade ahead of Fed Chair and Treasury Secretary testimonies yesterday, with sentiment maintained intraday as the dollar traded a near four-month high in the evening. The officials have indicated that they are not too concerned with stability, spurring increased safe-haven demand, further supported by COVID-19 third wave fears resulting in wavering risk appetite and uncertainty over Turkey. The dollar index reached a high 92.393 and ended the session at 92.343.
The euro gave back recent gains yesterday to trade lower as third wave of COVID-19 fears rise in the EU, with the ECB warning of a challenging economic time ahead for the bloc as rising infections and shortage of vaccines delay lifting of lockdown restrictions. The single currency traded a low $1.1840 just before ending the session at $1.1851
The pound took a significant hit yesterday after moving below its $1.3800 former support level to trade a six-week low. The UK’s vaccine rollout was a firm support for sterling, painting UK growth recovery and outlook optimistically, but lockdown and uncertainty around vaccine availability is weighing heavily on sentiment. The pound weakened to $1.3740 just before ending the session at $1.3752.
The Rand had an extremely volatile session yesterday having started at around R14.70/$, spiking up to a high of R14.9435/$ before midday, and then recovering back to the R14.70/$ level. Then in the New York session, the Rand turned around again to spike and end the day 1.2% weaker at R14.8942/$.
Yesterday, the SARB’s leading indicator value for January rose to a record high, indicating that the prospect for economic recovery in 2021 is even higher than initially anticipated.
Today’s release of local CPI data is due at 10am and is expected to print at the bottom end of the SARBs target range of 3-6% and todays release comes before the ever important MPC meeting tomorrow where the SARB will decide on interest rate policy going forward. Consensus is that the SARB will keep rates on hold but we are expected them to have 1 or 2 hikes later in 2021.
On the day ahead there is a variety of other inflation data from across the globe as well as sentiment score releases. The rand is likely to be driven by global factors as we await the SARB’s decision unless the CPI print today surprises in either direction.
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