The demand for the US dollar rose yesterday as investors sort for safety in the havens amidst the ongoing geopolitical tensions that have kept global markets on edge. The dollar index crossed the 96.200 thresholds, peaking at 96.236 level intraday. The dollar index maintained its upward trend for the better part of the day and finally settled at 96.190.
Following mixed eurozone economic data, the euro eased, losing its previously garnered positive sentiment. The single currency succumbed to dampened market sentiment as safe-haven inflows dominated. With momentum to the downside, the euro dipped to a low of $1.1299 to end the session at $1.1309.
A lack of support for the pound persisted yesterday as well, as it traded weaker against its rivals, on the back of the current volatile climate where markets are being rattled. In addition to geopolitics and Covid-19 pressures, the focal point for the pound remains the imminent rate hike decision from the BOE. The pound fell to a low of $1.3532 and closed the session at $1.3542.
The stars somewhat lined up in the rand’s favor intraday in yesterday’s session as the market seem to have digested the budget speech in a positive light, which was in line with our inhouse view. It was seen breaking below the key technical level of R15.00$ briefly to reach a low of R14.98$, although the local unit struggled to maintain those gains as escalating geopolitical tensions saw them reversed during late trades. The rand thus retreated from its lows to end the session on the back foot at R15.15$.
Some notable key pointers from the budget, the national treasury’s forecast of the main budget deficit outcome for FY21/22 was close to our inhouse forecast. They are expecting tax revenue to surpass the original budget target of R182bn and an overshoot of non-tax revenues of R15bn. Also, the national treasury forecasts the main budget deficit of R347bn which is 5.5% of GDP for the mentioned year. However, their forecast for FY22/23 came out less optimistic to our view of R314bn, 4.7% of GDP showing R387bn, 6.0% of GDP.
In the way of data today, we have PPI numbers on the local front. Internationally, we have jobless claims in the U.S amongst others. The rand is most likely to find direction from developments arising from key economic data lined up in the day ahead, along with further developments on geopolitical tensions.
Expected ranges for the day:
- USDZAR: R15.2000/$ – R15.4000/$
- EURUSD: $ 1.1154 – $1.1260
- GBPUSD: $ 1.3411 – $1.3528