International

The dollar fell on Friday, giving back the week’s gains as, amongst others released on the day, US April retail sales data disappointed, reducing fears of potential tightening from the Fed. FOMC meeting minutes scheduled for release this week will face some scrutiny as the Fed may prove to truly weather current economic conditions and maintain its accommodative policy stance. The dollar index fell to 90.286 and closed out the week at 90.304.

The euro found reprieve on the back of the dollar’s woes – following Thursday’s plummet over US CPI figures that prompted safe-haven demand, the single currency managed a turnaround, closing the week firm trading above the $1.2100 level. The euro strengthened to $1.2149 before closing out at $1.2143.

Pound Sterling saw gains on the day, trading stronger against the dollar. Weak US data lent support, but sterling has positive sentiment as investors remain hopeful over a recovery, especially after the fading of post-Brexit uncertainties. UK employment data will gain focus this week as the currency eyes the $1.5000 key level. Pound sterling strengthened to $1.4107 and closed out the week at $1.4101.

ZAR

For the second day in a row, The Rand traded in a 20-cent range on Friday, seesawing from 14.00 on the downside to 14.20 on the topside throughout the day. Ultimately the local unit ended the day marginally weaker and ended the session at R14.1301/$.

A shift in risk sentiment towards the end of last week has certainly made market participants take a step back and look at where the ZAR is and try to understand the strength on a deeper level, considering that just at the beginning of the year, majority of research houses, including ourselves, had forecast the Rand to be in the high 15 levels come end of May. Setting aside global factors for a second, the Rand may continue to hover over the week this week whilst we await CPI data on Wednesday and the next interest rate policy decision on Thursday.

However, we all know we can’t ignore international factors and drivers and that’s exactly what we will need to keep an eye on for the day ahead. Whilst data releases are few and far between today, any headlines which may cause shifts in risk sentiment are important to watch out for.

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.

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