The U.S. dollar index plunged after the ECB decided to leave their interest rates unchanged on Thursday, with less than expected US economic data also weighing on the dollar. U.S. GDP Advance fell short of market expectation by 0.70%, as it printed at 2.0%. Although Initial jobless claim data printed better than expected at 281k. Pending Home sales fell short of market expectation by -2.30%, as they printed at -2.30%. The dollar closed lower than the previous day’s close at 93.345, after dropping to a low of 93.278.
The euro was trading slightly soft ahead of the ECB monetary policy meeting, although rallied after it was decided that the rate would stay unchanged at -0.50%, which the market mainly expected. Furthermore, there has been an array of mixed economic data from the Eurozone yesterday, specifically from powerhouses Italy and Germany: In Italy, the business confidence data printed 114.9, surpassing market expectation by 2.7, however, the consumer confidence printed at 118.4, the missing market expectation by -0.10. In Germany, the unemployment rate SA printed at 5.4%, which is exactly in line with market expectation, but the unemployment change SA printed at -39k, missing market expectation by -19k. The euro closed the session at $1.1679, after reaching a high of $1.1692.
The pound sterling also came to the party yesterday, picking up some gains on the back of dollar weakness, as the ECB’s expected dovish rate decision held. The pound was thin on data in the session, although today there will be some U.K. data releases, including BoE Consumer Credit data. Moreover, the market still waits in anticipation of BoE policy meeting decisions. The pound reached a high of $1.3814 to end the session at $1.3788.
The rand extended its sell-off on Thursday, depreciating to a high of R15.1775/$ before closing the session at R15.1315/$, despite a weaker dollar, as persistent power crisis continued to keep the local economy in the dark, with month end flows also weighing on the rand.
Local PPI data printed better than expected, rising to 7.80% from 7.20% YoY but did little to cushion the rand. As we head to the polls on Monday for local government elections, the ZAR is likely to have a turbulent session.
On the day front, we have trade data locally. Internationally we have an array of data across the EU, UK and the US. As such, the local unit will most likely continue to follow global sentiment.
Expected ranges for the day:
- USDZAR: R 15.1000/$ – R15.3500/$
- EURUSD: $ 1.1610 – 1.1710
- GBPUSD: $ 1.3720 – 1.3820
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