Forex Report

Good morning

 

We wake this morning to major news out of the Middle East, news that will dominate headlines for the next few days at least while also putting pressure on the Rand as a risk asset.  Isreal has attacked Iran and a retaliation is all but certain. 

 

These are the mid rates at 5:55 today:

 

USD = R17.97	AUD = R11.65
GBP = R24.34	DXY = 98.20
EUR = R20.72	Brent Crude = $75.47 per barrel

 

Market News

 

• The week had been fairly boring as far as Rand movements go with us struggling to break away from a well-defined trading range around R17.70 to the Dollar.  That has changed this morning as we open at R17.97, and with every chance that further losses lie in wait for us over the next few sessions. 
• Trade headlines will take a back seat for a bit as the world watches to see how far the escalation in tensions between Isreal and Iran will go.  Reports this morning confirm that Isreal has targeted various Iranian nuclear sites, missile launch sites, nuclear scientists and military officials in what Isreal says is just the start of this operation.  Iran has confirmed that Hossein Salami, Commander-in-Chief of Iran’s Revolutionary Guard Corps, has been killed in the strikes and we will no doubt hear about further fatalities and damage to infrastructure in the coming hours.  With NBC reporting that Isreal is still targeting Iranian military official and nuclear scientists for assassination while Israeli Prime Minister Benjamin Netanyahu said “this operation will continue for as many days as it takes to remove this threat” it looks like we are in for an extended period of volatility. 
• The US has been very quick to confirm that this was a unilateral move by Isreal with no involvement from the US whatsoever, and as such they have warned Iran not to target US assets in any retaliation strikes, but they also confirmed that they were made aware of the strikes before hand which is why they ordered the evacuation of various US officials in the area yesterday.  Isreal and Iran traded fire in April last year, a skirmish that hurt the Rand at the time but that pain was short lived as Isreal’s strikes were primarily aimed at Hezbollah targets and not Iran itself, but with Isreal striking Iranian targets this time while warning of missile and drone attacks coming from Iran in the immediate future it looks like things are more serious now. 
• The Dollar has jumped this morning along with all other safe haven assets but things were actually looking good for us over Wednesday and Thursday with the Dollar Index falling to 97.60 on the back of cooler than expected US inflation readings.  Their consumer and producer inflation reports showed no signs of inflation accelerating due to Trump’s trade policies, and with inflation behaving itself the immediate inference was the FED might cut interest rates sooner than expected which is always a Dollar negative situation. 
• The following is from CNBC and talks to the lack of a US inflation scare weighing on the Dollar, but this is all academic now until the Middle East tensions settle down:  The Dollar slumped on Thursday, as weaker-than-expected US inflation data for May suggested that the Federal Reserve could resume cutting interest rates sooner rather than later. Vassili Serebriakov, FX analyst at UBS in New York, said higher tariffs are not showing just yet on inflation data, although he noted US growth seemed to be slowing. “We already priced in two cuts for the FED this year, which was less than two last week,” said Serebriakov. “The data is seen as potentially opening the window for the FED cutting either a little bit sooner or a little bit more.”
• No local market data today.
• Possible USD mid rate trading ranges in the Rand today are R17.85 and R18.15.

 

 

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