overview

The Dollar has been resilient in the markets this week as investors fled to the greenback as a safe-haven leading up to the Fed’s interest rate decision.

U.S AND SA MARKETS

The US Dollar proved strong in the developed markets this week. The Dollar gained significantly against a basket of currencies especially emerging markets. Inflation in the country continues to cripple the U.S economy. CPI in the US came in hot at 9.1% exceeding expectations, signalling to investors that the Fed is most likely to hike interest rates by 75 basis point, bets of a 100 basis point interest rate hike was withdrawn after two Fed officials said that they favour a 75 bps interest rate hike despite inflation figures.

The Fed was dealt with a hard hand with the U.S CPI data and have a very difficult decision to make with regards to their interest rate hike. They need to act strategically in order to avoid an economic recession. However, whether or not the economy will make a soft landing after their hike is very uncertain at this point.

The Dollar continues to hover near a two-decade high as investors still look to the greenback as a safe-haven, with inflation racing at its fastest pace in 40 years.

Oil prices gained slightly amid the expectations of a less aggressive rate hike from the Fed, although concerns about a recovery in demand eased the gains. Sentiment for the commodity did not receive much support due to the renewed Covid-19 outbreaks in China, this is definitely causing a halt in the demand for oil.

Locally, Eskom released a statement yesterday saying that we should expect to see load shedding throughout next week, giving us a full month of load shedding as of next week Wednesday. With the never ending load shedding as well as the sky high fuel prices, it seems that the future for our economy is rather gloomy and the Rand has taken a heavy knock as a result.

Technical
The greenback has been trading in a bullish pattern and the USD/ZAR pair saw a high of R17.31/$ this week. Although the Rand saw slight relief from the Dollar on Wednesday, the greenback remains steady. We expect the USD/ZAR pair to trade within the range of R16.85/$ to possibly R17.50/$ for a short while. Spreads remain wide as there is still a lot of uncertainty in the markets. We anticipate that the Dollar will give the Rand some breathing room leading up to the Central Banks interest rate decision where we could potentially see the R16.80’s level again.

EUROPEAN MARKETS

The Eurozone remains vulnerable and continues to feel the dire strains of the war. As the Eurozone continues to suffer at the hands of the war, the economy gets closer to the risks of fragmentation. The EU economy is on the brink of a massive breakdown. Fears that Russia may possibly halt Europe’s supplies of energy are indeed feeding to the fears of a recession as well.

Although the EU economy continues to suffer, it is anticipated that the ECB remains adamant on hiking their interest rates by 25 basis points at their next meeting this month, this will be their first interest rate hike in 11 years. The delay from the ECB in hiking interest rates like other countries has impacted the Eurozone economy as well as the country’s currency negatively.

The EUR has been the weakest against the Dollar in nearly twenty years this week. Seeing this close parity between the EUR/USD pair shows us that the Euro is indeed struggling to keep afloat.

Technical
The EUR has seen better days as the currency was 1:1 against the Dollar this week, last seen in 2002. Although the EUR is weak against the Dollar, the EUR/ZAR pair is trading in an upward trend seeing a high of R17.25/€. We encourage investors to take advantage of securing EUR at these levels, before the interest rate decision. We expect the pair to trade within the range of R16.97/€ to R17.45/€

UK MARKETS

The UK has seen their best days since former Prime Minister Borris Johnson resigned. The race for the conservative leadership remains underway and we are yet to see who the next Prime minister of the UK will be.

Investors seem to be pleased with the resignation of Borris Johnson as the British Pound has been making its way back up to the top in the markets. Online retail giant Amazon seems to be pleased with this as well as they have noted that they plan to create more than 4,000 jobs in the UK this year.

Technical
The British Pound traded in an upward trend this week seeing a high of R20.39/£ this week. The pound has not gained as exponentially as the Dollar but we can see the GBP/ZAR pair continuing to trade in an upward trend. We can expect the GBP/ZAR pair to trade within the range of R20.06/£ to R20.52/£