International

The US dollar see-sawed in yesterday’s session, as the market digested contradicting information from the Fed, changing its tune on the hawkish stance. Ultimately, the dollar managed to end the day in the green, reaching a high of 91.902 and ending the session at 91.802.

The single currency rallied after the Eurozone printed an upbeat manufacturing PMI of 63.10, higher than market expectation. As a result, the euro reached a high of $1.1970 but was unable to hold onto these gains, ending the day in the red at $1.1926.

The pound posted gains for the third consecutive session this week ahead of the Bank of England’s policy meeting today, which is expected to provide direction on the inflation outlook going forward. The pound reached a high of $1.4001 and ended the day at $1.3964.

ZAR

The local unit managed to post some gains as the dollar retreated, along with a basket of its emerging market peers as the Fed’s chair watered down concerns over policy tightening. The rand strengthened to a low of R14.1352/$ and ended the session relatively firm at R14.2075/$

In line with market expectations, local CPI rose to 5.2% in May, its highest level in 30 months from 4.4% in April, slightly above the midpoint of the SARB’s 3% – 6% target range.  The main contributors to this surge in inflation being increased fuel prices in conjunction with increased food and non-alcoholic beverages prices.

On the data front, locally we have the release of PPI figures to look forward to while the focus internationally will be on the US initial jobless claims figures as well as the BOE’s interest rate decision.  We expect the rand to take its direction from these events 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.

International

The dollar index edged higher in its late activities, ending the slightly firm after recovery from its earlier losses. Personal consumption expenditures (PCE)  figures most likely weighed in on the dollar in the session,  which printed 0.5% higher in May, although is still below market expectations of 0.6%.  The dollar index touched a high of 91.877 ending the session steady at 91.851.

The euro erased some of its earlier gains after a short lived rally following the PCE figures.  The euro  retreated  from its weekly highs to a low of $1.1924 before ending the session at $1.1933.

The pound was also on a downward trend and remained subdued throughout the day as markets continue to digest BOE’s comments.  Despite renewed optimism on Brexit issues,  the rapid spread of the UK Delta variant and delayed economic reopening continue to weigh on the pound.  The pound reached a high of $1.3935 to end the session weaker at $ 1.3877.

ZAR

The South African rand finished the week stronger, returning to its winning ways, benefitting from a weaker dollar environment associated with uncertainty surrounding inflation concerns in the U.S. The rand impressively appreciated to a low of R14.0200/$, the strongest we have seen in the week and closed off the week at R14.1275/$.

President Cyril Ramaphosa held a family meeting last night and addressed “Fellow South Africans” moving the country to adjusted level 4, and to be further reviewed in 14 days. He raised concerns about the new variant, appealing to fellow South Africans to follow public health regulations to help curb the spread.

Locally, we are clear on the data front and Internationally, we are expecting a release of inflation figures in Germany. The rand is most likely to be pressured this week given the surge in the new variant.

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.