The Daily Forex Market Report

Good morning

Two down and two to go.  Unfortunately I’m not talking about the number of days till we get to Friday but rather the major US tariff battlefronts with Canada and Mexico pretty much sorted while we still need similar resolutions for China and Europe.

These are the mid rates at 5:50 today:

Market News

• Things started off a little bumpy for the Rand yesterday as we opened at R18.71 to the Dollar and fell back to R18.83, but the afternoon session then saw us turn things around thanks to a weaker Dollar with us closing the day at R18.65.
• As mentioned in the opening line we are not out of the tariff woods by any stretch of the imagination with arguably the two biggest threats to stability in financial markets still ahead of us, those being China and Europe, but if the start of the week is anything to go by maybe all we will end up seeing is a round of dealmaking to avert tariffs and appease the market’s fears.  Trump’s aggressive approach to Canada and Mexico with a blanket 25% tariff on all imports was quickly met with concessions, and with the tariffs now postponed for at least 30 days, and probably indefinitely, the Dollar is on the back foot.       
• Deals with Canada and Mexico were closed within hours of each other but the White House has confirmed that there is no planned call between Trump and Chinese president Xi as yet, and as a result Trump’s 10% tariff on all Chinese imports is now in effect.  China has retaliated but in a very measured way by imposing their own tariffs, but only on very selected US goods, and one would assume that a call between the two leaders will be announced in the coming days.  For now the market is not seeing this as an inflammatory headline which allowed stocks to claw back lost ground yesterday while the Rand did the same. 
• The following is from CNBC and talks to the market now seeing tariffs as a negotiating tool and not an end in itself:  Volatility in currency markets eased a little on Wednesday after a turbulent start of the week following Trump’s imposition of steep tariffs on top US trading partners, with those on Mexico and Canada having since been delayed following negotiations. “I am actually quite surprised at the resilience of markets. Risk sentiment has been quite positive despite all the tariff headlines and the resumption of the US-China trade war,” said CBA’s Carol Kong. “I think part of the optimism stems from the fact that the US was willing to delay tariffs as long as the other countries gave Trump what he wanted.”
• On the local front Cyril Ramaphosa and Elon Musk have spoken in an attempt to rectify the recent flare-up around land being confiscated in South Africa and Trump immediately halting all aid to SA pending a thorough investigation.  Details around their chat are scarce but following post from the presidency points out that Ramaphosa and Musk spoke “on issues of misinformation and distortions. In the process, the president reiterated SA’s constitutionally embedded values of the respect for the rule of law, justice, fairness and equality.”
• Local market data today sees our December services PMI at 11:00. 
• Possible USD mid rate trading ranges in the Rand today are R18.55 and R18.85.

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