The Daily Forex Market Report

Good morning

 

AI related headlines can be quite scary at times but the latest from OpenAI is genuinely concerning.  An autonomous agent test “went rogue”, managed to identify a link to the internet when no internet connectivity was present, escaped its confinement and then hacked a different company, Hugging Face,  which is one of the world’s largest hubs for sharing AI models, all in a matter of hours.     

 

These are the mid rates at 7:05 today:

 

USD = R16.83	AUD = R11.73
GBP = R22.39	DXY = 101.43
EUR = R19.14	Brent Crude = $100.34 per barrel

 

Market News

 

• Also of concern is our exchange rate which went rogue yesterday afternoon with an immediate collapse to R16.86 to the Dollar.  Local headlines are taking most of the blame but looking at the Dollar Index the greenback enjoyed a move stronger at the same time which would have added to the Rand’s pain. 
• Price action for the Rand this week had actually been rather boring up until yesterday afternoon, this as we traded sideways in the R16.40’s before making it into the late R16.30’s yesterday morning as the market ramped up bets on a SARB interest rate hike later in the day.  Of 20 analysts polled by Bloomberg only three predicted the SARB would leave rates unchanged while the rest called for a hike and this distinctly hawkish view was thanks to our consumer inflation reading on Wednesday coming in a lot higher than forecast at 5%, well above the SARB’s 3% target. 
• The market was pricing in a SARB hike, hence the marginal Rand strength, so it was with some surprise when governor Lesetja Kganyago not only confirmed that no hike was forthcoming, but he also stated that our monetary policy is sufficiently restrictive to bring inflation back down to target over the next year or two.  So not only did they not lift rates but cold water was poured over prospects of a hike in subsequent meetings, a combination that smashed the Rand and we plummeted to R16.86 while officially becoming the world’s worst performing currency on the day. 
• For the first time in quite a while local headlines were the primary driver of the Rand’s price action but international developments also had a hand in our poor showing.  No prises for guessing that Middle East tensions were the culprit with it being confirmed that Iranian backed Houthi rebels in Yemen had struck two Saudi Arabian oil tankers as they tried to exit the Red Sea.  Military strikes are now occurring in two of the world’s key energy supply channels which has pushed Brent Crude above $100/barrel, reignited inflationary fears and ultimately resulted in bets of a FED rate hike next week climbing from near zero to 35%.  The Dollar advanced which would have put additional pressure on the Rand. 
• As if that’s not enough for the Rand to worry about it has also been confirmed that the US will be imposing tariffs of between 10% and 12.5% on over 60 trading partners from midnight tonight citing lax labour regulations as the justification for these tariffs.  To be fair, these tariffs are merely replacing a temporary global tariff that Trump imposed a while ago, and which expires at exactly the same time tonight, but headlines of “new” tariffs being rolled out is never good for risk appetite and would be weighing on the Rand. 
• No local market data today. 
• Possible USD mid rate trading ranges in the Rand today are R16.65 and R16.95.

 

 

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