The sterling, in particular, experienced a notable sell-off, ending the currency’s multi-week rally. The pound depreciated against most G10 currencies as risk-on market mood turned investors away from the developed currency. The GBP/ZAR pair depreciated by 1.25% during the week’s trade, falling from an open of R20.22 and touching lows of R19.90, before settling and closing the week around the R20.00 resistance level.
The US dollar also pulled back last week, on concerns of rising inflation and the higher cost of borrowing. The dollar Index (DXY) was down 0.92%, closing the week at 92.16, after kicking off on Monday around the 93.0 mark. The USD/ZAR pair also moved downwards, by 0.53%, closing around R14.60.
Despite the short-term correction in the pound, the UK’s fundamentals remain strong. Services Purchasing Managers’ Index (PMI) for March rose up to 56.3, up from 49.5 in February, highlighting the region’s economic progress. Construction PMI for March came in at 61.7, jumping up from 53.3 in the previous month. Furthermore, Boris Johnson indicated that his Covid-19 recovery roadmap is on track, with non-essential retail, gyms and pubs reopening on 12 April. With the uptick in economic activity, analyst forecasts indicated that the UK will reach-pre-Covid economic activity by the beginning of Q4 this year.
The US also produced another strong round of data, highlighting the country’s progress towards a full economic recovery. ISM Services PMI (March) jumped to 63.7 from 55.3 (month-on-month), marking the highest ever recorded growth in services. And while the US economic recovery has been supported by enormous monetary stimulus, the implication of looming tax rate hikes remains. Unemployment is still a major focus and concern, with weekly jobless claims up to 744,000.
This Wednesday, South Africa’s Retail Sales are due, after January’s 1.6% month-on-month decline. Mining production for February will also be released, after production slipped by 6.2% in January. Not much else is expected on the local data front, which is likely to result in a quieter week for the Rand. Most likely, the Rand will be influenced by global factors and risk-on sentiment. Progress in the global economic recovery will likely weigh heavily on the ZAR, gaining from renewed optimism and haltering on the emergence of any significant setbacks. Markets will no doubt be monitoring the re-opening in the UK and accompanying Covid-19 infection statistics, whilst keeping an eye out for any uptick in inflation.
Weekly market events
Monday 13 April
EU: Retail Sales (February)
Tuesday 14 April
UK: Balance of Trade (February)
US: Inflation Rate (March)
Wednesday 15 April
SA: Retail Sales (February)
NZ: Interest Rate Decision
Thursday 16 April
US: Retail Sales (March)
US: Weekly Jobless Claims
Friday 17 April
EU: Inflation Rate (March)
EU: Balance of Trade (February)