International

The dollar came off Tuesday’s highs yesterday, the dollar index tracking lower in the evening after the Fed maintained its Dovish stance on monetary policy, keeping rates unchanged at 0.25% as expected. The market’s reflation trade found traction again, as higher yielding currencies benefitted. The dollar index reached a low 90.559 and ended the session at 90.604

The euro found reprieve on the back of a weaker dollar overnight, breaking through the $1.2100 level, but with limited gains due to German Gfk consumer sentiment index unexpectedly moving lower as COVID-19 restrictions limit consumer activity. The single currency strengthened to $1.2132 and ended the session firm at $1.2123.

Similar to the euro, the pound tracked higher after US interest rates were unchanged. Any uneasiness about Prime Minister Johnson’s comments about letting ‘bodies pile up’ appear disregarded as cable makes a running for the $1.4000 level. The pound strengthened to $1.3948 and closed us out at $1.3941

ZAR

The South African rand was trading on the back foot in its early activities on Wednesday, as investors were positioning themselves ahead of the Fed’s rate decision yesterday. Late trades saw the local unit picking up momentum, clawing back its initial losses to end the day firm, as the Federal Reserve maintained its current policy trajectory. The extended dollar weakness and few other external factors continue to shield the rand from its domestic woes. The local unit initially weakened to a high of R14.4350/$ before strengthening to a low of R14.2100/$ and ultimately closing the day at R14.2400/$.

We are slightly heavy on the data cards today, with investors expecting PPI Inflation data locally. Internationally we have Unemployment numbers and CPI Inflation from Germany, and GDP data from the US. The local unit will most likely remain vulnerable to international data 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 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.