The US dollar took a nosedive in the session amidst the recent collapse of Silicon Valley Bank (SVB), one of America’s largest banks, which has taken a toll on the market as it may show how silently detrimental a continuous increase in interest rates has been. It cements the view that the Fed will stop their hiking cycle or hike less aggressively. Today all eyes will be on the much-anticipated US CPI figures as it is expected to be a key indicator of how hawkish the Fed may be. The dollar closed in the red at 103.595 after it dipped to an intraday low of 103.484.
The euro continued in its winning ways on the back of a plunging dollar in the session. However, the collapse of SVB has summoned risk-aversion into the market as investors flee to safe-haven assets, where European government bonds were placed under pressure and there is now a dovish shift in ECB’s upcoming decision for Thursday. Nevertheless, the shared currency peaked to a high of $1.0748 before it ended in the green at $1.0729.
The pound sterling traded higher in the session as the dollar came tumbling down on the back of the fall of SVB which sent jitters throughout the market. Consequently, British stocks also plunged but the currency traded stronger. Today the market will be on the lookout for the UK budget and unemployment data releases, along with US CPI, to gauge the effect on the currency and whether the BoE will also undergo a dovish shift. The pound ended in the green at $1.2181 and peaked to a high of $1.2199.
The local unit and a basket of its emerging market peers kicked off the week in positive territory and registered gains, buoyed by headlines from the US, regarding the collapse of Silicon Valley Bank, and how the Federal Reserve would move forward in terms of the U.S monetary policy outcome. The rand was seen strengthening to a low of R18.0950/$ intraday and managed to end the session lower than its opening at R18.2250/$.
Local gold, mining and manufacturing production data is expected today. Internationally, will be the U.K employment figures, and most importantly the U.S CPI figures. We expect the local unit to take direction from these events.
Expected ranges for the day:
- USDZAR: R18.1500/$ – R18.4000/$
- EURUSD: $1.0680 – $1.0760
- GBPUSD: $1.2130 – $1.2210