OVERVIEW

Political tensions, a hawkish Fed and positive US GDP boosted the dollar this week.
Despite the SA interest rates being hiked, the rand did not see much of a reprieve from dollar strength.

A combination of geopolitical factors and economic releases saw the dollar triumph and recover losses this week.
The US saw a positively received US Fed meeting despite the absence of any rate hike.
American data impressed as US GDP figures yesterday showed the strongest growth that the US have seen in 4 years, jobless claims also plummeted and the US unemployment remains lower than pre-pandemic levels.
The dollar is definitely dominating the markets and we expect this to continue for the coming days.
 
Yesterday we saw the SARB move to raise local interest rates by 25 basis points effective today, bringing the prime lending rate to 7.5%.
Although the SARB Governor mentioned that the economy was doing relatively well, inflation was surely the key factor resulting in a hike.
 
The rand lost ground against other emerging markets and the dollar once the Governor started speaking.
During the address, there was a 8cent spread between buy and sell on USDZAR, interestingly the bid (selling rate) was fluctuating far more than the buy, which showed that the sellers were dominating the market and dictating the rates.
 
Despite the fact that the local economy is doing fairly well, interest rate hikes are going to affect the residents of the country.
High inflation means consumer prices are hitting the ceiling and coupled with higher interest rates means citizens will feel the pinch this year.
With that being said, Eskom also wants to increase their prices by 20% in the next 6 months, whether that will happen remains to be seen.

Technically:
USDZAR remains trending in a bullish pattern, the pair was boosted by tensions in the East between Russia and Ukraine, and now the markets are likely still digesting all the data from this week as we opened at R15.46/$ which is more or less where we closed yesterday.
If the USD/ZAR makes a correction in the markets, we could see the pair retest R15.27/$ and touch R15.15/$ as a low in coming weeks.
However if the pair continue to trade above current support levels then we may see USDZAR pushing for R15.60’s.

The ECB, which supervises over 115 of the biggest banks in Europe, has recently sided with the US in posing a warning to Russia.
It was stated that if Russia invade the Ukraine, sanctions and ‘massive consequences’ would be implemented.
ECB officials have requested details on how the different banks will handle sanctions and a block against Russia on accessing the SWIFT international payment system which we use to transfer money globally.

The ECB remains fierce with their stance on monetary policy, stating that if inflation continues then they will need react but for now there is no reason for the European Central Bank to increase rates.

Technically:
The EURZAR remains supported by the R17.20/€ level and is trending sideways between R17.00/€ and R17.40/€. should the dollar continue to dominate we can expect the EURZAR pair to trend towards the higher levels of R17.35/€ and above.

The rand gained against the sterling last week dropping form highs of R21.12/£ down to R20.43/£, however this week saw GBPZAR gaining everyday in favour of the pound.
It seems even though the rand has been overbought that the pound is now slowly gaining it’s losses against the rand.
Investors are still very cautious with the pound as their have been many requests to have the Prime minister “booted”.
Amongst other things, there is still an ongoing investigation into the publication of Sue Gray’s report which was to investigate illegal actions of the Prime Minister.
Next week will have focus on the BoE as officials forecast an increase of rates from 0.25% to 0.5%, which may give the pound added strength.

Technically:
Failing to break R20.40/£ means the pair have rebound back above R20.60/£ and supported by R20.70/£, should the rand lose ground then we may return to test R21.00/£ but if markets stabilize and re-enter riskier plays then R20.50/£ may be seen once more.