The trend of the last couple of days of a stronger dollar and emerging markets weakness held up once again last night. We have seen the rand breaking above the R15.80 level, and we start this morning at R15.85 with the rand and other EM’s looking quite vulnerable. The combination of a stronger US dollar and weaker commodity prices have placed further strains on commodity currencies, of which the rand is one. It is hard to bet against the trend, and even if the market feels stretched at the moment, taking a look at other EM’s currencies, it seems that there is little to stop the train at the moment.
With the expectation of lower growth and productivity from further lockdown hitting the market, we have seen metals under pressure. Gold has retraced back from the $1,860 level of a couple of days ago and is currently trading at $1.808. Platinum and Palladium have not been spared the wrath and are trading in the red at $1,017 and $1,981 per ounce, respectively. Brent Crude is still below the $80 per barrel mark and trading at $79.23 per barrel.
The US dollar has continued on its bullish run and is currently trading at 1.1234 against the euro. We have also seen a tick-up in the Dollar Index, which indicated that the market is flooding back into the US dollar and the euro taking the strain. The announcement of Jerome Powell being nominated by Joe Biden has caused a bit of a US dollar rally, as this gives the market more certainty of Powell’s economic plan coming to pass. Global stock indices are mixed, which is a good guide as to the uncertainty in the market as we await the impact next round of lockdowns due to COVID in Europe and the Fed minutes out later this week.