Foreign Exchange Market Commentary – 6 April 2021

Rand Morning Briefing: 14.40 to hold

Bottom line: The rand has been doing extremely well but it’s going to take a huge amount for USD/ZAR to get through 14.40 so the betting is still for a reversal. Trade starts at 14.58 with mild upside pressure after a 14.53 low. Event risk is low.

  • Great US data!
  • Non-farm payrolls up a huge 916k in March
  • Business confidence surges: ISM and service ISM at multi-decade highs
  • Data details mixed: slow wage growth, but inflation lead indicators rise
  • US equities surge to record highs
  • Fed hikes now priced for Dec 2022
  • But, remarkably, treasury yields constrained with 10-year under 1.70%
  • Dollar weakens on risk appetite and treasuries: EUR/USD above 1.18
  • A great environment for risk currencies
  • ZAR one of the best performers, extends outperformance v EM basket
  • Post Covid lows seen on EUR/ZAR and CNY/ZAR
  • USD/ZAR has broken 14.80/85 and 14.60 with ease
  • Yet it would take a continued alignment of factors to break 14.40
  • Oil under pressure as OPEC increases production: Brent at US$62/bbl
  • Yellen calls for global minimum corporate tax rate
  • Cosatu public unions threatens strike on wage restraints
  • SA agrees deal to buy 20m Pfizer vaccine shots, delivery starting April
  • Low new SA virus cases through Sunday – post Easter surge coming?
  • Data/event risk low today, focus on Fed minutes tomorrow

USD/ZAR below the 2021 open but 14.40 is tough support

 

The week ahead: Catch-up to the weekend

Bottom line: It’s a funny week as the key risks occurred over the long weekend, implying some catch-up volatility today, but with very limited risks hereafter.

Key factors to watch this week:

  • Playing catch-up after the holidays. Markets such as SA and most of Europe reopen Tuesday needing to catchup to the payroll figure, and ISM services figure.
  • The Fed is back in focus in the week proper as the minutes are released Wednesday and Powell speaks Thursday.
  • Data risks are relatively limited.
  • The IMF will present its latest World Economic Outlook forecasts on Tuesday.
  • On the virus front, we’ll be looking at US stats to see their pace of increase as well as the local numbers post Easter for any signs of the much spoken about April surge.

In the financial markets, attention will be on both US treasury yields and on EUR/USD.

 

Source: RMB Markets