The Daily Forex Market Report

Good morning

The market was holping that we would get news of a last minute deal to avert the looming tariff threats but it looks like that deal is not going to come, and while the currency market hasn’t reacted too severely just yet the same cannot be said for equities. 

These are the mid rates at 5:55 today:

Market News

• It would appear that a major escalation in the global trade war is here but the Rand is holding up quite well thus far.  We opened yesterday at R18.64 to the Dollar and managed to eke out gains by touching R18.57 in the afternoon session before comments from Donald Trump knocked us back to R18.66.
• There’s a lot going on at the moment but the biggest headline yesterday came from Trump when he said “there is no room left for Mexico or Canada” to negotiate, and that tariffs “are all set, they go into effect tomorrow.”  The market has gotten used to eleventh hour negotiations coming in to save the day but this time around it looks like no such deals are forthcoming, and we are moving into a new chapter in the trade war story where $900bn worth of goods from the America’s northern and southern neighbours will now attract a 25% tariff while goods arriving from China have been bumped up to 20%. 
• Understandably the Canadian Dollar and Mexican Peso both dropped to one-month lows following Trump’s announcement, and the Rand also felt some pain as we moved from R18.57 to R18.66, but it’s interesting to see that the Dollar Index had an initial spike to 106.75 but has since come back down to 106.52 which has spared us from further losses.  Canada and China have already confirmed they have retaliatory plans in place so further currency market volatility is not out of the question, but for now the Rand remains relatively unscathed, unlike the equity market which took yesterday’s developments quite badly. 
• A stronger Euro could be the reason why the Dollar Index has been well behaved despite risk-off headlines aplenty.  The UK and European countries have quickly rallied around Ukraine in an effort to table a combined peace deal that shows solidarity across Western Europe, a narrative that is supporting the Euro, while suggestions of massive spending plans by the new German government have also supported the common currency.  The Euro is comfortably higher than the dip it suffered on Friday following Trump and Zelenskiy’s very public spat, and with the Euro having a strong weighting in the Dollar Index that is helping shield the Rand from further losses. 
• The final factor which could be weighing on the Dollar is yet another softer than expected US market data release, this as their manufacturing PMI for February was forecast to drop from 50.9 to 50.6 but it came in at 50.3.  The reading keeps their manufacturing sector in expansionary territory by staying above the 50 point threshold, but with this softer than expected print adding to the developing narrative of a cooling US economy that points to the FED cutting twice, or maybe even three times this year in an attempt to stimulate economic activity over the coming months.  Prospects of interest rate cuts are always Dollar negative. 
• Local market data today sees our Q4 2024 GDP report at 11:30 and with the forecast suggesting a jump from -0.3 in Q3 to 1.0% in Q4 hopefully that pulls through into support for the Rand. 
• Possible USD mid rate trading ranges in the Rand today are R18.50 and R18.80.

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