overview

Supporters of the Dollar are back and better than ever, viciously rallying the markets this week to 2 year highs and it may seem as though it’s only up from here for the greenback.

Markets opened at R14.60’s/$ on Tuesday after the long Easter weekend, however after a Stage 4 announcement from Eskom, the Rand started losing ground. That, coupled with Russia’s potential default news, saw emerging market currencies start a 4 day ride of losses against the Dollar and other currencies. Adding to loss of risk appetite toward the Rand – The Fed Chair Jerome Powell mentioned overnight that he supports a 50 basis point interest rate hike at their next meeting in May 2022. The Fed will do what they need to end the dire strain of inflation. Powell has also mentioned that it will be very difficult for the Fed to avoid a recession, so they will have to move carefully and strategically. He has also signaled that similar interest rate hikes will follow in future meetings. We can see Dollar investors starting to price in this commitment and back the Dollar.

The job market in the U.S. is said to be red hot right now, with initial jobless claims dropping again, having decreased to 184,000. This is the best data that the job markets has seen since 1970. The number of initial jobless claims in the country is expected to stay at 60-year lows as the economy boasts a recovery.

The oil price has fell on the back of Dollar strength. Although this has been the least volatile week for oil since the Russian invasion, we anticipate that it will continue to lose more as the days go by. The commodity stands to lose even more if the European union goes ahead with a ban on Russian oil.

Technically:
The USD/ZAR is trading in a bullish trend, having broken out the downward channel it was following since November last year. The USD/ZAR moved up by R1 in the last 4 days. Now, having surpassed R15.60/$, we can see technically that the pair could most likely gravitate towards the levels of R15.85/$ and possible even R16.00/$ in the coming days.

EUROPEAN MARKETS

The EUR has gained back its losses this week, this comes after ECB officials put an interest rate hike in the third quarter in the agenda for the EU. This would be the banks first interest rate hike in 12 years and is expected to be a 25bp hike. This is going to be a huge shift for the EU and is very necessary considering the war still happening as well as extremely high inflation in the country.

The war between Ukraine and Russia continues day by day as Russian president Putin has declared victory in the country’s battle for the City of Mariupol but it seems as though the EUR has had enough of this bluff and is preparing to take the markets by storm.

Russia is still on the verge of going into a default and is under massive economic pressures after multiple sanctions globally. We are yet to see if Russia will comply with their creditors and pay them in Dollars.

Technically:
The EUR has spiked quite a bit opening the markets at R16.66/ € after having seen levels of R15.18/ € on Tuesday. This shows us that the EUR is optimistic and will continue to try and gain back its losses since the start if the Russian invasion of Ukraine. We can expect the pair to trade within the ranges of R15.50/€ – R17.08/€ and possibly even see R17.30/€ .

uk markets

The GBP has caught up to its losses faster than the USD and the EUR. There has not been much happening in the UK, however, economists slashed the countries economic growth forecasts on the basis that the household disposable income will fall to the lowest it has seen in decades.

Economists said that the GDP in the UK could now be anticipated to come in at 3.8% this year, revised down from projections of 4.5% prior to the Russian invasion of Ukraine. Inflation in the UK still calls for concern and is estimated to reach a peak of 8.4% in the second quarter. The UK has evidently been negatively affected by the Ukraine invasion and is said not to be facing a growth crises but indeed an inflation crises.

Technically:
The pound has gained strength significantly against the Rand having gone above R20.00/£. This has been quite an increase from last seeing levels of R18.87/£ on Tuesday. The GBP/ZAR pair is currently trading in an upward trend and we can expect to see levels of R20.05/£ – R20.50/£

Technical levels we are watching for next week: