ZAR weakens against USD
The USD has been seeing bad days these past few weeks due to its inflation rates being at their highest since August of 2008. This came after the Federal Reserve had made statements back in March suggesting that the sharp rise in inflation rates was only temporary. The rates continued to rise and consumer prices were still on the increase, with gasoline seeing over 50% increase from the previous year, inflation rates were well above the Fed's projected 2%. This lead to the events that occurred on Wednesday, where the Fed projected that interest rates that were meant to be revised in 2024 could come earlier with two interest hikes in the same year. Fed's Chair Jerome Powell did signal that they anticipate the high rates to simmer down, and Fed had raised its inflation expectations by 1 point to 3.4%. Regardless of these final remarks from Powell, the dot plot, which is a chart used by the U.S Central Bank to signal it's outlook for interest rates, was reflecting that the interest hikes really could come sooner than anticipated.To get more news about WikiFX, you can visit wikifx.com official website.
When a country increases its interest rates, it's bonds become attractive for foreign investors and that sparks a race for the country's currency, making it stronger. Since this unexpected turn of events occurred, much of the U.S assets have become attractive for investment such as bonds, which has made investors shift their attention away from gold. And as a result it plummeted while the USD appreciated. Gold was not the only to plummet though, as the flourishing streak of ZAR was ended by a sharp fall from 13.7 back to the 14 price. The ZAR has been doing well against most currencies prior to the Fed announcements. Now that it's above the 14 level, this will be an area of interest for many traders to see how the week ends as it will help in determining the direction the USDZAR pair will take.
President Ramaphosa recently moved the nation to lockdown level 3 on the 14th of June with stricter measures to assist in curbing the spread of the pandemic. The changes include a tighter curfew, restrictions on gatherings and shorter trading hours for most businesses. This might have contributing effects on the direction of the country's currency in the coming weeks. As of now, most of the attention on the pair is focused on its performance on today, the last day of the week, as many directional biases will be formed based on the close of this week's candlestick.