The Daily Forex Market Report

Good morning

After drifting sideways around R18.50 to the Dollar for most of last week the Rand finally got the memo and reacted to Dollar weakness on Friday.  Unfortunately for us it’s a US public holiday today so we’ll have to wait till tomorrow to see if further gains are on the cards.

These are the mid rates at 6:25 today:

Market News

• For most of last week it looked like the Rand was somehow not taking notice of the steadily falling Dollar Index but that changed on Friday as we opened at R18.49 before trading progressively stronger to his R18.30 as the day’s best level.  We’ve held onto most of those gains as we start the new week at R18.35, but with the Dollar taking today off we’ll probably see muted movements in the currency market. 
• The back half of last week had three major talking points capturing the market’s attention and fortunately for the Rand all three were Dollar negative.  Trump’s tariff threats were the biggest headlines for most of the week but while they first spooked the market things then settled down considerably when it was confirmed that the various tariffs would be delayed until March or April.  The market took this as a sign that Trump’s main objective is to use tariffs as a tool to initiate widespread trade negotiations, and with risk-off sentiment easing that took a lot of steam out of the Dollar.
• The other two focal points for the week came as a bit of a surprise, those being the suddenly quite advanced peace talks that Washington is driving between Russia and Ukraine while on Friday afternoon we also got a much weaker than expected US retail sales print.  On the war front it has been confirmed that talks between senior US and Russian delegates are being held in Saudi Arabia this week in an attempt to set the scene for talks which will also include Ukraine at a later date, and while we are still far from an actual ceasefire the prospects of an agreement are fostering risk-on sentiment. 
• The final source of Dollar weakness was the January US retail sales report on Friday afternoon which was forecast to drop by -0.1% but fell by a much larger margin of -0.9%, and in so doing raising questions about the strength of the US consumer.  Analysts have pointed out that bitterly cold conditions across most of the US during January coupled with the LA wildfires, the second largest metro in the US, would have negatively impacted consumer shopping, but the downbeat sales report saw the market immediately increase its bets on multiple FED rate cuts this year which weighed on the Dollar.
• The following from Reuters sums up all three forces pulling the Dollar lower which has been good news for the Rand:  The Dollar was on track for a weekly loss against the Euro on Friday as a delay in the introduction of trade tariffs planned by US President Donald Trump raised hopes that they may not be as bad as feared, while optimism about a peace deal between Russia and Ukraine helped the single currency rally. “Markets are still hoping that tariff headwinds are not going to be as significant as perhaps previously feared, then probably the bigger element this week is enthusiasm about potential Russia-Ukraine ceasefire and to what extent that might be positive for European growth in particular,” said Vassili Serebriakov, an FX strategist at UBS in New York. “The US retail sales are probably a tertiary factor, but it’s kept the Dollar on the back foot.”
• No local market data today but the week ahead is a busy one domestically with our Q4 2024 unemployment rate tomorrow and then CPI plus retails sales and the Budget Speech on Wednesday.
• Possible USD mid rate trading ranges in the Rand today are R18.25 and R18.55.

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