The Daily Forex Market Report

Good morning

The worrying news is that Donald Trump appears to be singling South Africa out for some special attention, and very unwelcomed attention as he has cut off all US funding while opening the door to resettling our “refugee” farmers in the States.  The good news is that he has immediately moved on to much bigger headlines which will without doubt take the world’s gaze away from SA.   

These are the mid rates at 5:45 today:

Market News

• The spat between Trump and SA was certain to weigh on the Rand once the market opened for early trade this morning but more recent, and much more headline-grabbing developments have pushed the Dollar higher meaning a fall in our exchange rate was going to happen regardless.  We closed on Friday at R18.42 to the Dollar but we’ve already touched R18.64 this morning before recovering a little to R18.52.   
• Reports suggest a mad scramble to send a high-powered SA delegation to Washington in the hopes of de-escalating a political row that has ramped up at an alarming pace.  The Trump administration has halted all funding to SA citing “race-based discrimination” against Afrikaaners, and without providing any evidence of our farmers being displaced a program is being put in place to relocate farmers as refugees into the States.  A quick end to this dispute seems unlikely and the Rand will struggle should things escalate further.
• Monday was set to be a difficult day for the Rand but then came yesterday’s headlines which have made it a bad day for most currencies fighting against the surging Dollar.  Trump confirmed that he is putting a 25% tariff on all steel and aluminium imports into the US with immediate effect while also warning that he will be putting reciprocal tariffs on all countries that currently have tariffs on US-made goods heading to their countries.  This is a major trade war development and comes only a week after he suspended tariffs on Canada and Mexico in what was hoped was a more measured approach to trade relations, and the Dollar Index is powering ahead as a haven asset. 
• This latest round of tariffs came just hours after German chancellor Olaf Scholz said that the European Union is ready to react “within an hour” should the US levy tariffs on EU goods and the market is now bracing for an escalating trade war which would in all likelihood lift inflation while also damaging demand.  The hope is that Trump is once again using tariffs as a negotiating tool and that a deal will be struck at the eleventh hour to avert the tariffs, but for now the uncertainty is spooking the currency market with the Rand under pressure. 
• Tariff headlines will dominate proceedings today but it is worth noting that FED Chair Jerome Powell delivers his bi-annual two-day testimony in front of the US Congress on Tuesday and Wednesday, and as usual, his comments will be scrutinised for clues on where the FED might be going with interest rates.  We also get the next US inflation report on Wednesday which will be equally important when trying to work out whether the FED will cut twice this year, or once, or maybe no cuts at all. 
• No local market data today. 
• Possible USD mid-rate trading ranges in the Rand today are R18.45 and R18.75.

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