The Daily Forex Market Report

Good morning

Budget Speech Wednesday has arrived and on the local front, all eyes will be on Finance Minister Enoch Godongwana as he delivers his first budget under the GNU.  Concerned/pessimistic articles  claiming that he is stuck between a rock and a hard place but let’s see if he has a few tricks up his sleeve. 

These are the mid rates at 7:05 today:

Market News

• Very little movement in the currency market yesterday despite a few international developments which seem to favour the Dollar as a haven asset.  We opened the day at R18.45 to the Dollar and spent the rest of the day bouncing around the R18.40 mark.
• Locally, today is an action-packed day as we get our consumer inflation print as well as our latest retail sales figure before attention then turns to Enoch Godongwana and his Budget Speech.  On the inflation front, the forecast is for CPI to tick higher from 3.0% to 3.2% which would keep it right at the bottom end of the SARB’s 3% to 6% target range, but a move higher should pour cold water on any prospects of another SARB interest rate cut which in turn could strengthen the Rand. 
• As far as the Budget Speech goes it will be interesting to see how Godongwana balances the need for the government to spend more on everything from defence to healthcare, education, infrastructure, SOE and social grants, but in an environment where tax revenues are forecast to come in significantly below the projections from Feb. 2024’s Budget Speech.  Spending less will be a difficult and unpopular move, borrowing more is not an option as a fifth of our tax revenue is already being spent on servicing existing debt and raising taxes will be met with harsh criticism.  Good luck then to Mr Godongwana!!!
• Looking further abroad the Dollar Index is inching higher thanks to new tariff threats from Donald Trump as well as escalating political tensions as the US and Russia appear to be pushing for a peace deal which, as yet, has had zero involvement from Ukraine or Europe.  On the trade front, Trump spoke yesterday about tariffs of around 25% on automobiles from the 2^nd of April alongside something similar for pharmaceuticals and semiconductors, a move that widens the tariff conversation and brings further uncertainty to the market.  The Dollar found a margin of support on this development, but with ample time for a deal to be negotiated while no actual tariffs have been implemented, the reaction was fairly muted. 
• The following from CNBC explains why the market is reacting less and less to each new tariff headline:  The US Dollar held firm on Wednesday on the back of tariff concerns and tense Russia-Ukraine negotiations.  Trump said on Tuesday he intends to impose auto tariffs “in the neighbourhood of 25%” and similar duties on semiconductors and pharmaceutical imports. “So long as Trump is viewed as the boy who cried wolf on tariffs, chunky USD long positions will come under pressure,” said Sean Callow, senior FX analyst at InTouch Capital Markets.
• Local market data today includes our CPI report at 10:00 a.m., December’s retail sales figure at 1 p.m., and the Budget Speech at 3 p.m. 
• Possible USD mid-rate trading ranges in the Rand today are R18.25 and R18.55.

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