The dollar edged higher in its early trades yesterday, as dollar demand remained the order of the day, while the market continued to digest positive economic data from the US. Although the dollar struggled to maintain its momentum, as it was seen giving up all its previous gains during the NY session, to end the day on the back foot. The dollar index reached a high of 96.241 and closed the session comfortably at 95.828.
Challenging conditions persisted for the euro yesterday, as it dipped sharply at the start of the session but thereafter managed to post marginal gains. The euro remained under pressure as the havens were a main driver, although changing sentiment lifted the single currency during late trades. The euro fell to a low of $1.1262, before retracing its losses to end the session slightly at $1.1319.
The pound continued on an upward trend, buoyed by better-than-expected CPI and PPI data releases. CPI rose to 4.2% YoY vs markets expectation of 3.9%, with PPI surging to its highest in a decade. With the upbeat economic data and various economic conditions, market participants anticipate that this will undoubtedly compel the BOE to review its accommodative stance taken thus far. The pound traded a high of $1.3496 and ended the session at $1.3480.
The local unit traded a tight range yesterday, struggling to settle below R15.45 on the day, and ended the session slightly firm. Local economic data came to the rand’s aid, lending supporting against the dollar. Retail sales surprised to the upside, printing 2.1% YoY, beating the expected 0.2% contraction. October CPI printed 5.0% same as the prior month. Investors look to both releases for indications whether the SARB will hike rates in the final MPC for the year today at 13:00. The rand reached a high of R15.5778/$, and aa low of R15.4410, before consolidating to end the session at R15.4933/$
The SARB reduced rates by 300bps last year to help the economy battle the COVID-19 pandemic, while inflation has increased modestly in the second half of the year. Price pressure should increase in November as fuel price increases start to bite and this could provide further justification for a hike despite load shedding weighing heavily on growth
A Reuters poll showed 13 economists expected the SARB to leave rates unchanged while 7 expect a 25-basis point hike. Internationally, we have Jobless claims data from the US. The rand will continue to remain vulnerable to both local and global data releases due for today.
. Expected ranges for the day:
- USDZAR: R 15.3500/$ – R15.3500$
- EURUSD: $ 1.1265 – $1.1365
- GBPUSD: $ 1.3420 – $1.3525
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