The US dollar continues to remain under pressure, declining for a 2nd consecutive session yesterday, as the release of mixed U.S. PPI data saw dollar demand fade. While developments of the Ukraine crisis and surging Covid cases in China remain in the backdrop, investors now shift their attention to the Fed’s rate policy decision, where markets anticipate the Fed to kickstart its rate hiking cycle with a 25 bps increase. The dollar index reached a low of 98.638 before ending the session at 99.097.
The euro firmed against the dollar and continued to lure investors. The euro soared at the start of the session, ticking past the $1.1000 psychological level but was slightly dented post the release of a slump in March ZEW data, which sparked further concerns of economic growth and raised inflation on account of the ongoing Russian and Ukrainian tensions. The single currency reached a high of $1.1019 and a low of $1.0924 and closed the session at $1.0951.
Pound Sterling posted marginal gains although with reduced momentum, taking advantage of a weaker dollar. Risk sentiment continues to sway in the pound’s favor as markets speculate that the BoE could possibly hike rates by a bold 50bp. After opening the day at $1.3000, the pound reached a high of $1.3088 before ending the session at $1.3038.
The South African rand managed to claw back its gains on Tuesday, despite the market’s continued anticipation of interest rate hike from the Fed, with retreating commodity prices also having little impact on the local unit. With little support from economic fundamentals, the rand continued to demonstrate some resilience and still eyeing the R15.0000/$ handle. The local unit reached a low of R15.0600/$ before ending the session firm at R15.0975/$.
Locally we have Retail sale date today, and on the international data cards we have an array of data coming from Italy and the US, with the US’s Fed meeting been the main event of the day. The rand will most likely remain vulnerable to the Fed’s outcome on rates, along with other market moving events.
Expected ranges for the day:
- USDZAR: R15.0000/$ – R15.2000/$
- EURUSD: $ 1.0900 – $1.1120
- GBPUSD: $ 1.3022 – $1.3088