The Daily Forex Market Report

Good morning

It may seem like Donald Trump is keeping the market on its toes with his regular social media posts but a study by JPMorgan reminds us that his first term truly was a rollercoaster ride by comparison.  Last week he increased his intensity by posting 20 messages that moved the currency market, but at his peak first time around his average was 60 market moving posts a week!!!

These are the mid rates at 6:45 today:

Market News

• With the US closed for Presidents Day yesterday there isn’t much to report on from abroad but unfortunately local jitters saw the Rand give up a little ground in the absence of Dollar movements.  We opened at R18.35 to the Dollar and quickly fell to R18.45 before trading sideways for the rest of the day. 
• With the Rand taking direction from local headlines yesterday that left us exposed to mounting concerns around Wednesday’s Budget Speech where the consensus is that Finance Minister Enoch Godongwana has very little wiggle room to move.  Godongwana is expected to main his commitment to fiscal prudence as far as possible, but with reports suggesting that tax revenues will fall short of forecasts while government expenditure continues to expand this does not bode well for our debt to GDP ratios.  And let’s not even talk about our struggling SOE’s with Eskom still unable to even service its R400bn debt pile!!!
• The following from a recently run Reuters poll highlights the challenges faced by Godongwana:  South Africa’s National Treasury budget deficit forecasts will be wider than in its October estimates for the next three years, a Reuters poll found. “Spending pressures are increasing due largely to rising debt-service payments given elevated global borrowing rates, social-spending programmes and ongoing support for state-owned enterprises such as debt relief for Eskom,” said Dennis Shen, senior director at Scope Ratings. “These factors are likely to hinder budgetary consolidation efforts and hold the government deficit at elevated levels and maintain public debt on a structurally increasing path to 80% of GDP before the end of this decade.”
• Getting past tomorrow’s Budget Speech is the Rand’s primary objective but at least we are dealing with local challenges at a time when the Dollar Index is still suppressed at two-week lows.  The international week begins in earnest today and with any luck the Dollar will remain on the back foot thanks to the triple forces of tariff delays, potential progress on a Russia / Ukraine peace deal and softer than expected US market data which is bringing the chances of multiple FED cuts this year back onto the table.
• The following from CNBC:  In the broader market, the Dollar was struggling to recoup its losses after a selloff on the back of Friday’s weak US retail sales data and as investors cheered a delay in the implementation of President Donald Trump’s reciprocal tariffs. “Dollar weakness was a function of both ongoing optimism that maybe tariffs are not going to be as disruptive as originally thought, that of course, remains to be seen, and the Ukraine story is still bubbling in the background there,” said Rodrigo Catril, senior FX strategist at NAB. “And then the data, of course, playing to the idea that maybe the US exceptionalism is running out of steam, so it’s weighing on the US Dollar.”
• Local market data today sees our Q4 2024 unemployment rate at 11:30 with an increase from 32.1% to 32.4% expected. 
• Possible USD mid rate trading ranges in the Rand today are R18.30 and R18.60.

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