The dollar index edged lower in Wednesday’s trading session, as dollar demand subsided, with US yields also closing the day softer. The US housing starts data came in better than expected, as building permits showed an increase despite higher duties imposed, although couldn’t lift the dollar. The dollar tested a low of 95.492 on the day and ended the session firmer at 95.510.
The euro found some reprieve on the back of softer US yields and rising Germany 10-year bond yields, which for the time since 2019 rose above 0%. The upcoming ECB meeting may do very little to support the euro, with policy divergence between the ECB and the Fed still posing a threat to the euro. The common currency tested a high of $1.1354 on the day, before ending the session at $1.1346.
The pound sterling seized an opportunity to push back, as retreating US yields saw the dollar tracking on the back foot, although the pound’s gains were capped on the day. The British PPI inflation rose printing at 5.4%, the highest in 30 years, suggesting a rate hike by the BoE is on the cards. Hopes of a recovery for the pound are dampened by Brexit and the call for changes in leadership in the UK. The cable ended the session at $1.3613 after testing a high of $1.3649 on the day.
The rand found some reprieve and rebounded in yesterday’s session underpinned by rising December CPI print of 5.9% YoY from a prior 5.5% print, fueling expectations of an interest rate hike from SARB in its upcoming monetary policy meeting. The risk positive environment saw the rand strengthening to a low of R15.2695/$ to finally close the session firm at R15.3263/$.
No data is on the cards today locally, but we have the headliner US Initial Jobless Claims print in the afternoon and other key data releases from the UK and Eurozone amongst others. Anticipate global headlines to drive markets.
Expected ranges for the day:
- USDZAR: R15.2500/$ – R15.4500/$
- EURUSD: $ 1.1320 – $1.1360
- GBPUSD: $ 1.3600 – $1.3650