The US dollar index extended its winning streak to touch a five week high on Wednesday on the back of the Fed announcing that an increase in interest rates and a tightening of its monetary policy will most likely occur in March. With high US inflation numbers weighing on the mind of the central bank’s Fed Chair Jerome Powell, who expressed that the central bank would remain open minded when making adjustments, but ultimately left its policy rate unchanged for the time being. The dollar had a slow start on the day, slipping to a low of 95.911, then recouped some of its losses to touch a high 96.5360, before ending the session slightly softer at 95.9480.
The euro extended its losing streak for a third consecutive session on Wednesday. With no economic data to offer the euro reprieve, along with negative market sentiment, the common currency fell victim once again to a dollar that continues to outperform its haven peers. The euro traded under pressure for the better part of the day to touch a low of $1.1237 before ending the session at $1.1239.
The pound slipped during Wednesday’s trading session, failing to build on the previous sessions winning momentum. Weighed down by a stronger dollar following comments by the Fed, the pound slumped to a low of $1.3442 and dipped sharply and finally ended the session at $1.3461.
The South African edged lower in its early activities yesterday, with improving risk appetite creating room for EM assets to scoop some gains. Although the local unit struggled to hold on to those gains, as overnight activities saw the rand giving up its advantage on the back of the Fed’s decision to keep rates unchanged. Another big event is still ahead for the rand, as the SARB is due for its policy decision today, with the market expecting a 25bps hike. The local unit reached a low of R15.1200/$, before retreating to a high of R15.3625/$ and ultimately ending the day weaker at R15.3375/$.
On the data front, we have domestic PPI inflation and the SARB policy meeting today. Internationally, we have an array of data from the US and the UK. The local unit will most likely remain vulnerable to both domestic and international data.
Expected ranges for the day:
- USDZAR: R15.3000/$ – R15.5000/$
- EURUSD: $ 1.1190 – $1.1260
- GBPUSD: $ 1.3400 – $1.3480