The dollar index traded on the backfoot amidst improved risk sentiment, as well as the ECB’s rate hike decision. Risk-aversion waned off in the session on the back of Credit Suisse’s announcement to borrow money from the Swiss National Bank to stabilize their liquidity “position”. The currency was placed under pressure despite an improvement in Initial Jobless Claims, which printed at 192K vs. an expected and prior prints of 205K and 211K, respectively. The dollar index touched a low of 104.065, before closing at 104.418.
The euro rebounded from the previous session’s losses after the ECB stuck to their guns and hiked their interest rates by an anticipated 50 bp, regardless of this week’s banking turmoil that sent jitters throughout the market. However, this eased up after Credit Suisse’s liquidity solution mentioned above. The euro ended the session at $1.0605 after it peaked to a high of $1.0635.
Pound Sterling also maximized from dollar dips spurred on by a strengthened euro on the back of a rise in ECB rates. Moreover, an improved risk sentiment in the session also attributed to the pound’s relief. Since UK banks have not been directly affected in the banking turmoil, it is likely the BoE may follow the same hiking path as the ECB to tame high UK inflation. The pound reached a high of $1.2128 and closed at $1.2107.
The local unit remained relatively range bound throughout the session as ripples of the US and European banking sector’s crisis continues to drive investors to the havens. The negative turn in risk sentiment saw the rand depreciating to a high of R18.4525/$ but the local unit managed to claw back some of its gains in late trades, before closing the session below its opening level at R18.4050/$.
The data docket is muted on the local front today, with Industrial Production figures and the U Mich Sentiment print expected from the US. The rand will be driven by these events, while monitoring the market’s alternating risk conditions.
Expected ranges for the day:
- USDZAR: R18.20/$ – R18.45/$
- EURUSD: $1.0630 – $1.0710
- GBPUSD: $1.2140 – $1.2220