International

The dollar found itself on the back foot once again yesterday as market participants erred on the side of caution ahead of today’s US CPI print. Today’s print is key after last week’s massive miss on Nonfarm Payrolls data, the biggest miss since before 1998. Expectations on inflation today is for it to print at 3.6%, the highest in the last 10 years. The dollar index fell to a low of 89.982 before ending the session flat at 90.141.

The Euro attempted to recoup the losses from Monday, but only managed to regain half during yesterday’s session. German investor sentiment surged to its highest level since before the COVID-19 pandemic began, boosting support for the Euro. The common currency reached a high of $1.2182 and ended the session at $1.2148.

Pound Sterling extended gains yesterday, remaining well above the $1.4100 level since its run through this level on Monday, bolstered by election results and optimism on improved economic activity as restrictions ease. The pound reached a high of $1.4166 but dipped back below to end the session at $1.4142

ZAR

The South African rand continued to edge lower on Tuesday, breaching its latest low, on the back of stronger manufacturing data. The Manufacturing Production data come out better than expected yesterday, printing at 3.4% compared to the Reuters Poll of 0.5%, which signals strong economic activities and an improving outlook on domestic economic recovery. A weaker dollar and rising commodity prices on the day most likely weighed in on rand strength as well. The local unit reached a low of R13.9450/$ before ending the session at R13.9943/$

Today we are slightly heavy on the data cards, although we have nothing to expect locally. Internationally, we have CPI Inflation data from the US, Germany, and France, and GDP from the UK, amongst others. The local unit will most likely continue to track 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 dollar paused yesterday, halting its decline just before the index broke through 90.000. Following the sharp drop from Friday, the dollar carried the momentum into Monday but managed to pull back intraday with the dollar index ending the session flat at 90.212.

The Euro pulled back and gave up some of Friday’s gains yesterday, moving downwards since morning opened until the end of the session. The common currency reached a low of $1.2128 and ended the session at this low.

Pound Sterling surged ahead yesterday, registering a 1.01% gain yesterday when it reached a high of $1.4158. After breaching the psychological $1.4000 level in early trade yesterday, the pound continued ahead and showed no signs of stopping as it ploughed through the next big figure at $1.4100 as well. While momentum from Friday carried through, the move stronger was also as a result of positivity surrounding growth in the UK as Prime Minister Boris Johnson announced that the next stage of opening the economy will go ahead as planned now that two-thirds of the adult population have been vaccinated. The pound reached a high of $1.4158 but dipped back below to end the session at $1.4118.

ZAR

The South African rand continued to defy the odds to kickstart the week yesterday, returning to its pre-covid levels. The local unit breached the R14.00/$ mark in its early activities on the day, although intraday trades saw the rand slightly struggle for direction, as it retreated to trade the better part of the session above R14.00/$. The continued accommodation in global policy environment, broader dollar weakness, and rising commodity prices remain the main instigators of rand strength, along with the strength of other EM assets. The local unit strengthened to a multi-year low of R13.9573/$ before consolidating to end the session R14.0390/$ on the day.

Locally we have Manufacturing Production (M/M) data due for today, and internationally we have a few numbers coming out of Europe. The rand will most likely continue to follow global trends 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.