The Daily Forex Market Report

Good morning

After being minted for 230 years it looks like the US penny has come to the end of the road.  Donald Trump has ordered the end of penny production, and when considering that the US Mint made 3.2 billion pennies last year alone at a cost of 3.7c for the 1c coin then calling time on it makes a lot of sense. 

These are the mid rates at 6:05 today:

Market News

• Not making a lot of sense yesterday was movements in the Rand but we won’t ask too many questions given that our direction was stronger despite all the headlines swirling around.  We had fallen to R18.64 to the Dollar very early in the day but the Rand then went on a nice little run to R18.36 by the afternoon session before giving back some of those gains to close at R18.44.
• The Dollar Index’s gains were only marginal yesterday but understandable given the fresh tariff headlines, the threat of even more tariffs with all countries who currently levy tariffs on US goods and the mounting uncertainty around how many times the FED will cut interest rates this year.  Maybe one reason why the Dollar’s move higher was negligible is that while Trump has signed the executive order for 25% a tariff on steel and aluminium imports these tariffs are only due to come into effect of the 4^th of March which gives ample time for a deal to be struck with all, or some of the countries involved.   
• From a monetary policy point of view the next two days are quite important, this as we get FED Chair Jerome Powell’s two day testimony in front of the US congress as well as the latest US CPI reading tomorrow.  Bets of multiple rate cuts this year are dwindling, and with US inflation trending slightly above the FED’s 2% target coupled with many FED members saying they are in no rush to cut as time is needed to assess the impacts of Trump’s trade policies this points to continued Dollar strength. 
• The following is from Reuters:  The Dollar firmed on Tuesday after U.S. President Donald Trump moved to substantially raise tariffs on steel and aluminium imports and said he would announce plans to impose reciprocal tariffs on other countries over the coming days. Recent comments from FED officials have underscored their no rush approach to further rate cuts, particularly as they wait for further clarity over how Trump’s policies will affect economic growth and inflation. “There is a consensus among FED members that the central bank can be patient when it comes to easing further in an environment in which growth is resilient, inflation is above target, the policy rate is close to neutral and there is elevated policy uncertainty,” said analysts at ANZ.
• Looking at the immediate future on Sunday Donald Trump said that he would be announcing reciprocal tariffs on all countries by Tuesday or Wednesday this week, so that means today is now in play.  During Trump’s second term thus far he has done what he’s promised so we should expect these headlines to drop in the next 48 hours which will no doubt have an impact on the currency market. 
• Local market data today sees our December manufacturing production stats at 1pm.   
• Possible USD mid rate trading ranges in the Rand today are R18.35 and R18.65.

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