The dollar kicked off the week on a high note, strengthening against rivals in yesterday’s session as safe haven demand steered markets, with market participants awaiting further signals on the Fed’s next moves and in anticipation of US retail sales figures, which are set to give additional clues to US economic activity and its recovery. The dollar index reached a high of 95.595 and ended the session at 95.407.
The euro edged lower yesterday, trading weaker against the dollar following comments from the ECB president, who maintained the outlook that elevated levels of inflation are transitory and that rate hikes are highly unlikely. Growing fears of increasing Covid-19 infections in the eurozone further dented sentiment, with many countries considering reinstating lockdown restrictions ahead of the holiday season. The single currency dipped to a low of $1.1354 before closing out the session at $1.1367.
The pound found support and posted slight gains on the back of positive sentiment as investors position themselves for an array of key UK data releases later in the week, with many market participants anticipating a possible tightening of the BOE’s monetary policy. The pound traded a high of $1.3449 to close the day at $1.3418.
The South African rand was seen leading a pack of emerging market currencies yesterday, starting the week on the front foot, although the local unit’s gains were capped towards end of day. Apart from a broadly softer dollar on the day, along with a broader re-entry into riskier assets, investors strategies ahead of the local CPI data and MPC also aided the rand on Monday. Positive Chinese economic data eased concerns and lifted EM’s. The rand reached a low of R15.1465/$ before ending the session at R15.15.2289.
The SARB starts its 3-day MPC meeting today culminating in a decision on interest hikes on Thursday. Domestic inflation and retail sales data is due to print on Wednesday. According to the Reuters Poll, CPI is expected to come out at 5.0% YoY and the SARB is expected to leave interest rates unchanged at 3.50%.
Locally we are empty on data. Internationally, we have an array of significant data ranging from the EU, the UK and the US. The local unit is most likely going remain vulnerable to global data and other market moving events.
Expected ranges for the day:
- USDZAR: R 15.1500/$ – R15.3000$
- EURUSD: $ 1.1350 – $1.1410
- GBPUSD: $ 1.3400 – $1.3480
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