The Dollar started the week strong, while load shedding could curtail the Rand’s momentum.

Weekly market assessment for the week ahead

Week starting 06-02-2021


USD

  • The USD continued trading sideways over the past week, with this week starting off on a stronger note.
  • Main events from last week included disappointing Durable Goods Orders (-1.3% as opposed to an expected +0.7%) and an unchanged Gross Domestic Product (GDP) growth figure of 6.4% vs. an expected 6.5%.
  • The fears of runaway inflation have abated with the tapering in GDP and the slowdown in durable goods orders.
  • The most anticipated data release this week is the Nonfarm payrolls data on Friday. It’s expected to increase to 664,000 after an extremely disappointing 266,000 last month.  Any further disappointment here could result in USD weakness.

EUR

  • The EUR made significant gains against the GBP this past week. Only during the latter part of the week did the currency pair stabilise. The trend was mainly driven by the continued increase in economic activity in the EU.
  • Business activity within the EU continued to show a positive trend as vaccine rollouts pick up pace in member countries. Stimulus packages such as the Pandemic Emergency Purchase Programme (PEPP), dovish monetary policy and relief of supply bottlenecks were the main support factors driving economic activity in the region.
  • The past week also saw the release of higher inflation figures for some of the largest EU members (Germany and Spain). This does not bode well for inflation for the region and accounted for the weaker EUR at the end of the week.

GBP

  • Last week was rather light on the data front for the UK. This week, Manufacturing Purchasing Managers Index (PMI) came in at 65.6 for May, falling slightly from highs of 66.1 in April. Construction PMI is due on Friday, after the reading stood at 61.6 in April.
  • The sterling held up relatively well in the markets, making some gains against the Dollar. GBP/USD appreciated by 0.28%, closing the week at 1.4185 after touching highs of 1.4220.

ZAR

  • The continued strength in the ZAR has created important support levels around 19.45 against the Pound.
  • This is amidst unemployment rate figures printing lower than expected and the continued devaluation of the USD.
  • South Africa has also started load shedding again. This can have a detrimental effect on production output for commodity-based industries in the medium to long term if the schedule intensifies.

AUD

  • Last week Wednesday we saw the release of data pertaining to construction work done for the first quarter which increased by 2.4%.
  • The GDP growth rate for the first quarter was released early this morning. The data came out better than expected with the quarter-on-quarter rate at 1.8%, which is above the expected 1.5%
  • The AUD did not move too much against the USD last week, but it has strengthened about 0.3% so far this week.

NZD

  • New Zealand's trade surplus narrowed to NZD 388 million in April of 2021 from NZD 1,350 million in the same month a year earlier.
  • The Reserve Bank of New Zealand (RBNZ) held its official cash rate (OCR) at a record low of 0.25% during its May meeting, but projected a 25 basis points rate hike to 0.5% by September 2022.
  • The Kiwi Dollar pulled back against the Pound, depreciating by 0.66% and closing the week at 1.9589 from an open of 1.977.

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