The Daily Forex Market Report

Good morning

Welcome to the new week, a week that has our long awaited 2025 Budget Speech pencilled in for Wednesday afternoon but depending on which article you read out there it seems that consensus on how to fund the budget has yet to be agreed.  Robust discussions behind closed doors are no doubt in full swing. 

These are the mid rates at 7:15 today:

Market News

• Last week was a barnstormer for the Rand and it looked like Friday was going to put the icing on the cake as we opened the day at R18.13 to the Dollar and strengthened to R18.05.  But just when a break below R18.00 became a serious possibility things turned around as we fell to R18.25 by the close, and in early trade this morning we’ve already touched R18.34.
• The predominant themes last week were those of Dollar weakness and Euro strength, factors that saw the Dollar Index register its worst weekly performance since November 2022 while the Euro fluffed out its tail feathers with its best weekly gain since 2009.  The combination of these two forces set the scene for day after day or Rand gains against the Dollar, but as is always the case when a financial instrument moves too far in one direction the chances of a snap back increase which means a recovery bounce for the Dollar is to be expected at some point.
• The Dollar’s woes have been multifaceted but they ultimately boil down to the market’s repricing of possible FED rate cut activity.  Only a few weeks ago the general consensus was that only one cut in 2025 was the likely outcome, while analysts at Bank of America went as far as predicting that the FED’s next move would be to lift rates.  The Dollar Index was above 109 points at the time but a slew of weaker than expected US data releases coupled with inflationary and economic concerns around Trump’s tariff tactics saw the index plunge to 103.50 by Friday afternoon, this as the market is now pricing in three FED cuts this year with the first cut coming around June or July, and with the Dollar Index having fallen so far that helped the Rand make a run towards R18.00. 
• Looking at recent US data in more detail the market was a little harsh when it punished the Dollar on Friday afternoon when 151 000 new jobs were announced, only just below the forecast of 160 000, but I suppose one has to also factor in that their unemployment rate moved up from 4.0% to 4.1% which is not what the FED wants to see.  It can hardly be said that their labour market is falling apart, but when layered on top of other weaker data of late this solidifies the case for three cuts in 2025 which was Dollar negative. 
• This morning has seen risk-off sentiment knock the Rand back to R18.34 while US equity futures are in the red again after suffering a very bruising week last week with these moves being attributed to a Trump interview over the weekend where he refused to rule out a US recession as a result of his tariff plans.  The following is from Reuters:  Adding to investor jitters, Trump in a Fox News interview on Sunday declined to predict whether the US could face a recession amid stock market concerns about his tariff actions on Mexico, Canada and China. “There is a period of transition, because what we’re doing is very big. We’re bringing wealth back to America,” Trump told the “Sunday Morning Futures” programme. Tony Sycamore, market analyst at IG, said the comments are exactly the type of thing risk assets didn’t want to hear after a tough three weeks. “Strap in tight – we have all the ingredients in place for another testing week ahead.”
• No local market data today and the main events this week are our Budget Speech as we well as the latest US inflation report, both on Wednesday afternoon. 
• Possible USD mid rate trading ranges in the Rand today are R18.20 and R18.50.

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