International

The dollar was weaker on Friday, tracking lower following the ECB’s announcement to keep their low interest rates unchanged, prompting investors to believe the Fed’s dovish stance will also be maintained in this week’s Fed policy meeting. Investors will pay attention to the Fed’s comments on employment and vaccination to gauge sentiment on expected economic growth. Positive US manufacturing data out on Friday also did little to lend support to the safe-haven dollar, as investors are still led by the reflation narrative, supporting EM. The dollar index reached a low 90.812 and ended the session at 90.832

The euro posted further gains on Friday after the ECB eased investor concerns about them ending their bond-purchasing program, with sentiment further aided by positive PMI data for the services sector, indicating the Eurozone might be on track for a good recovery. The single currency ended the session at its firmest for the day at $1.2099, having broken a key resistance level of $1.2000 on the day.

The pound found support on Friday, rebounding from Thursday’s lows to trade firm, aided by dollar weakness and positive UK PMI data. Large focus rests on how central banks of developed economies position their policies to determine market direction, so sentiment for the pound may be weighed, limiting gains, if the US Fed remains dovish in this week’s policy meeting. The pound closed out firm at $1.3871

ZAR

The South African rand struggled for direction on Friday, trading sideways and ultimately ending the session flat on the day. The local unit has been stuck in range for the past six sessions, with dollar weakness underpinning the rand’s strength, along with that of other emerging market currencies. The rand reach a high of R14.3510/$ and a low of R14.2300/$ before ending the session at R14.2685/$ on the day.

Locally we have  no data for today, and internationally we have Business climate data from Germany and Durable Goods data from the US. The local unit will most likely continue to track the dollar, along with 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 US dollar continued on its path to recovery yesterday, almost getting back to where it was before Monday’s big fall. Recent strength on the greenback stems from risk off sentiment in markets as well as better than expected jobless claims data yesterday, indicating a recovery in the US jobs market. President Biden’s new capital gains tax proposal also aided the dollar in late afternoon trade yesterday. The dollar index reached a high of 91.419 ended the session at 91.333.

The euro fell during yesterday’s session as a result of a stronger dollar. Before the turnaround in late afternoon, the common currency had initially strengthened ahead of, and after the ECB’s policy decision where they decided to keep rates on hold. Although the euro briefly dipped below $1.2000 and reached a low of $1.1994, it pulled back and closed the day at $1.2015.

What goes up, must come down and yesterday Pound Sterling proved this as it successfully wiped the large gains made on Tuesday from the board. Where the stronger dollar was the initial driver of the move lower, it was the diminishing advantage that the UK has on vaccine rollouts that added to the decline as Europe catches up with faster rollouts and additional doses. The pound reached a low of $1.3824 and ended the day at $1.3839.

ZAR

The rand saw marginal declines yesterday, retreating to trade above R14.30/$ as delays in global vaccine distribution has uncertainties creeping back into the market. With significant currency moves on the back of yields, investors still await direction from major economies as interest rates continue to take focus, despite the ECB keeping rates unchanged last night. The rand closed us off just shy of R14.30/$ and R14.2941/$.

With no local economic events out today, expect global factors to drive market 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.

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