The dollar index traded on the backfoot yesterday, giving up its previous gains on the back of reduced geopolitical tensions and lower US Treasury yields. Better than expected economic data failed to lend support to the dollar, with Retail Sales up by 3.8% and Industrial Production by 1.4%. Later in the trading session the Fed shared minutes of their FOMC meeting where a rate hike was confirmed. The dollar index ended its session at 95.700 after it depreciated to a low of 95.677 on the day.
The single currency was on the upside as dollar demand grew dim despite robust US economic data. The euro shrugged off new developments of new Russian troops at the Ukrainian border and continued its rally. The shared currency tested a high of $1.1395 and ended the session firm at $1.1378.
The pound sterling also benefited from broader dollar weakness as the Fed’s FOMC meeting minutes were less hawkish than market participants expected. The UK CPI rose to 5.5% YOY contributing to the pound strength. The cable strengthened to high a of $1.3600 and ended the session at $1.3583
The South African rand continued to demonstrate a remarkable performance on the day, finally managing to settle below the R15.0000/$ handle after multiple attempts. A broadly weaker dollar, along with soft domestic inflation data most likely supported the rand’s move lower. Local inflation data came out in line with market expectations, printing 0.20% MoM and 5.7% YoY, which will most likely diminish aggressive rate hikes by the SARB. The local unit reached a low of R14.9800/$ before ending the session at R14.9925/$ yesterday.
Locally we have nothing on the data cards. Internationally, we have Jobs claims data from the US. The rand will continue to track global trends and other moving events for clues.
Expected ranges for the day:
- USDZAR: R14.8500/$ – R15.1500/$
- EURUSD: $ 1.1320 – $1.1400
- GBPUSD: $ 1.3545 – $1.3615