Following a great start to the day, the dollar struggled for the better part of the session and ultimately gave up all its initials gains during late trades. Despite the rising prospect of a 50 bps increase by the Fed, and the pressure from the prolonged Russian invasion into Ukraine, risk appetite seemed comfortable in global markets yesterday. The US dollar wasn’t the only safe haven that came under pressure on the day, we also saw gold remain range-bound for a 5th consecutive session, with downside pressure. The dollar index retreated from a high of 98.965 to a low of 98.323 before the closing of the day flat at 98.493.
The euro seized an opportunity to capitalize on the dollar’s misfortune yesterday, kick-starting the week on the front foot as safe-haven demand came under pressure. The single currency, along with other risky assets benefited from improving risk appetite across global markets, despite prevalent risk and the race to aggressive policy tightening. The common currency reached a high of $1.1043 before ending the session firm at $1.1029.
Pound Sterling was amongst the biggest winners against the dollar on the day, bolstered by investors’ increased appetite for risk. A combination of the UK’s inflation data and budget update gave the sterling a further boost. The cable soared to a high of $1.3273 before ending the session at $1.3262.
The Rand extended its strengthening bias in yesterday’s trading session, opening the day stronger at R14.9600/$. The local currency continued to rally regardless of high-interest rates and faster tightening comments from Federal Reserve Chair Jerome Powell. Market participants’ expectation of a rate hike from SARB and Investor Inflows lifted the Rand further, appreciating to a low of R14.7850/$ as it ended the session at R14.8100/$ on the day.
This week’s focus is on The Monetary Policy Committee whose meeting started yesterday and concludes on Thursday when the decision of the repo rate will be announced, the market sentiment is that the SARB will hike the rate by 25 basis points come Thursday.
President Ramaphosa held a family meeting last night, were he shared more ease on restrictions of Level 1 Alert, he touched on gatherings, social distance requirement, which is now 1 meter, travel and made a plea for the nation to get vaccinated. The National Sate of Disaster is to end soon as a public comment has been sought for the proposed new regulations.
On the day ahead, we are not short of data as locally we have CPI YY and MM. Internationally, there is an array of inflation data from the UK, New Home Sales from the US, and Consumer Confidence from the Euro Zone. The rand is likely to be driven by global factors unless the CPI print today surprises in either direction.
Expected ranges for the day:
- USDZAR: R14.7000/$ – R14.8700/$
- EURUSD: $ 1.0990 – $1.1075
- GBPUSD: $ 1.3220 – $1.3320