Forex Report

Good morning

Windows users will know and fear Microsoft’s “blue screen of death”, a screen that appears when there’s a critical error with your operating system and which requires a restart to (hopefully) fix the problem.  This error screen has been around since the early 1990’s but in a few months’ time it will be retired, never to plague our computers again, but it will be replaced with a new black error screen so we are not safe just yet. 

These are the mid rates at 7:10 today:

Market News

• The Rand is also not safe as local political headlines always have the potential to knock us back, and that’s exactly what happened yesterday.  Dollar weakness was the dominant theme across global markets and we managed to hit R17.57 to the Dollar in early trade, a new best level for 2025.  But local developments then took the wind out of the Rand’s sails with a fall to R17.87 the result while also losing ground against all other currencies. 
• The Dollar is having a very tough time in 2025 thus far with the Dollar Index falling to a fresh 3 ½ year low against the Euro and the Pound yesterday, a slump that saw us strengthen to R17.57 before our local stumble.  It’s crazy to think that last Saturday’s US bombing of Iran set the world on edge but less than a week later we have a ceasefire that is seemingly holding up, and with that geopolitical flashpoint now in the rearview mirror the market is focusing back on US monetary policy from a few different angles and the net result is a weaker Dollar.
• The above point mentions a few different angles when it comes to FED conversations and that’s because not only is the market trying to work out when the FED will cut interest rates again but all of a sudden there is a lot of chatter around who will be the next FED chair, and more importantly, when will Donald Trump announce his nomination.  Trump appointed Powell during his first term as president but he has become increasingly vocal on his disproval of how slowly the FED is lowering interest rates and there are rumours that Trump will announces Powell’s successor this year, long before Powell’s tenure ends in May 2026 in an attempt to create a shadow FED chair that the market will start listening to. 
• If Trump does announce the new FED chair early, somebody who is more sympathetic to his lower interest rate perspective, that would be Dollar negative hence the pressure on the greenback yesterday.  The following is from Reuters:  The prospect of Trump announcing the next FED chair, who is expected to be more dovish, earlier than usual to undermine the current chair Jerome Powell has raised odds of the central bank cutting rates. “The sooner a replacement is announced for Powell, the sooner he could be perceived to be a ‘lame duck’,” said Carol Kong, a currency strategist at CBA.  “Such an outcome could introduce some volatility into financial markets if the nominee makes public comments markedly different to the current chair. For now, expectations President Trump will choose a more dovish chair will keep downward pressure on FOMC pricing and the USD.”
• Speculation on Powell’s replacement hurt the Dollar yesterday but Powell himself caused an element of Dollar weakness, this as his two day testimony at the US congress came across as more dovish than the market expected.  Powell spoke of the need to be patient with their next rate cut as more data on tariff induced inflation is needed, but rather than slamming the door shut on a cut in July he did say the FED is ready to act sooner if the situation warrants it.  Bets of a July cut have gone from 12% to 25% which is still low, but any increase in these odds is Dollar negative and good for the Rand. 
• We made it to R17.57 yesterday with chances of a move below R17.50 firmly on the cards, until wasn’t.  The presidency announced that Cyril Ramaphosa has fired the DA’s Deputy Trade, Industry and Competition Minister without giving a reason for the move, a development that was met with stern resistance from the DA while also shaking the market’s confidence in the GNU.  No doubt there are more twists and turns in this tale, but for now the immediate reaction has been Rand weakness as we fell to R17.87 while the Dollar Index remains suppressed. 
• No local market data today and all eyes will be on the FED’s preferred inflation reading at 2:30pm. 
• Possible USD mid rate trading ranges in the Rand today are R17.70 and R18.00.

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