The Daily Forex Market Report

Good morning

Knock knock.  Who’s there?  Stage 6 load shedding.  Ag no man!!!!

These are the mid rates at 6.45 today:

Market News

• As South Africa prepares for what looks like a full week of load shedding the Rand has taken no notice of this hugely frustrating development.  We ended last week on the front foot with a close at R18.34 to the Dollar and we open today slightly better at R18.32. 
• Load shedding being announced and then ramped up to Stage 6 yesterday was a real body blow for the country, and unfortunately unlike the recent bout of power cuts that barely lasted the weekend this time around it looks like we’ll be relying on generators, solar panels and battery back ups for at least the next five days.  Hopefully the various technical faults which have been blamed for this situation are easily fixable, but for now its best to keep a close eye on your load shedding schedule. 
• Less than ideal local headlines but fortunately they have come at a time when the Dollar is on the slide which in turn means we get to hold onto last week’s gains.  The strength of the US economy over recent years has seen the term “US exceptionalism” being used to describe how they are the only game in town, and while this is still pretty much the case we saw a few weaker than expected data points late last week which raised questions around just how strong their economy is.  Their composite services and manufacturing PMI reading fell from 52.7 to 50.04, consumer sentiment dropped to a 15-month low and existing home sales came in below expectations, all readings that suggest the FED could cut rates twice this year and that has pulled the Dollar Index down to its lowest level since mid-December at 106.16. 
• Also aiding our cause is a strengthening Euro, and given the common currency’s weighting in the Dollar Index good news for the Euro typically means good news for the Rand.  Germany held their national elections yesterday and with the conservative party winning along with no unexpected surprises to upset the predicted coalition talks that has seen the Euro posting decent gains against the Dollar.  Germany is in its second year of recession but yesterday’s election could see the start of a more favourable business environment and that too is proving a tailwind for the Euro this morning. 
• The following is from Reuters:  The Euro jumped to a one-month high and stock futures charged ahead on Monday after Germany’s conservatives won the national election as expected, with investors awaiting further results to see whether much-needed fiscal reform was likely. “Coalition dynamics remain uncertain, suggesting political fragmentation could still lead to policy paralysis,” said Charu Chanana, Saxo’s chief investment strategist. “However, there is an immediate relief that there were no big nasty surprises in the election outcome, and a centrist-leaning government will persist and could even pivot more towards business and investment friendly policies.”
• No local market data today.
• Possible USD mid rate trading ranges in the Rand today are R18.20 and R18.50.

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