overview

The rand is closing in on possibly closing the week in the green against the dollar.
A aggressive ECB and BoE pressured the dollar this week and Non-Farm Payrolls will decide how USDZAR closes today.

A sell-off of risk currencies last week saw USDZAR begin the week around R15.61/$, but February brought a firming for the rand and saw the USDZAR open each day slightly lower.
Opening this morning at R15.24/$ is indicative of the gradual firming of the rand – factors behind this include dollar buyers closing their positions to secure profits, surges in Asian stocks and good earning results boosting risk appetite once more, and anxiety over central bank decisions keeping investors out of decisive buys or sells.

The ECB and BoE talks played in the rand’s favour by giving aggressive talks and placing pressure on a vulnerable dollar.
Adding to the dollar’s frailty yesterday was the US initial jobless claims which came out a tad lower than expected, estimates were around 245,000 but figures showed 238,000 – still a decline but anything less than expected is dollar negative.

Today’s focus will be on the Non-Farm Payroll data this afternoon, which will show how many jobs were added to the US economy in January.
A good number will push the dollar up over resistance levels, this afternoon may be volatile due to the data with results influencing how we open next week. Currently, arguments are balanced as to whether the Non-Farm Payrolls will be weaker or stronger.

Local conditions not playing in the rand’s favour remain threats such as load shedding and adverse reactions to the new Omicron sub-variants.

Technically:
USDZAR remains trading in a range between R15.00/$ and R15.50/$ which is panning out to be the standard range of the rand against the dollar. Anything below this ‘new norm’ should push importers to hedge their risk and consider FEC’s at levels lower than R15.00/$.
Currently the USDZAR pair remains supported by R15.20/$ and below a resistance of R15.55/$, until market moving events pushing us over or below these levels we will likely simply range around these rates.  

The European Central Bank kept interest rates unchanged in yesterday’s policy meeting.
President Lagarde delivered a hawkish tone talk in her statement, not removing the possibility of a rate hike later in the year and advising that policy members are worried about inflation.
Usually hints at inflation would be vague and without direction, but yesterday President Lagarde challenged the regular narrative we are used to and mentioned that inflation risk is to the upside – marking a complete policy turnaround for the ECB which will begin to unwind soon.

Technically:
The EURZAR trended in our predicted forecast from last week’s round up, with most movement between above R17.20/€. If the current trend persists then we may see a move nearer to the lows of R17.25/€ but the euro is being supported by yesterday’s euro-positive ECB meeting.
If the pair pushes over R17.50/€ then expect higher levels closer to R17.65/€, but we expect muted movement similar to the past week. A range of R17.20/€ to R17.50/€ will likely dominate in trading.

Event of the week for the pound was the Bank of England interest rate meeting. Which resulted in the UK’s policy rate being hiked by 25 basis points, moving the overall rate to 0.5%.
Furthermore, monetary policy officials voted unanimously to rope in bond purchases which indicates a recovering economy.
The euro outperformed the pound yesterday as the hike was expected and hopes were for a 50 basis point hike.

Political tensions remain high as senior aides have resigned from PM Boris Johnsons staff after the PM launched an ‘attack’ on Labour leader Sir Keir Starmer. Further raising questions over Boris Johnson’s leadership, a threat to the pound’s current stability.

Technically:
GBPZAR also fell within our predicted range with a gradual upward trend after failing to break R20.95/£ and R20.50/£, a move to test R20.61/£ is on the cards but may change if the dollar begins to pressure the pound should good data be released in the US.
There’s no impetus for the sterling to test higher than R20.89/£ but if GBPZAR doesn’t break lower than R20.65/£ then we will range around R20.65/£ – R20.90/£.