The Daily Forex Market Report

Good morning

As financial markets brace for the next wave of tariff announcements suddenly the picture in the US isn’t as bad as everyone was predicting, and as a result the Dollar is showing signs of life.  Unfortunately for the Rand that means pressure on our exchange rate. 

These are the mid rates at 5:50 today:

Market News

• It looked like the Rand was off to a decent start yesterday as we opened the week at R18.20 to the Dollar and then went on a nice run to R18.10 by around midday, but that’s where the fun stopped as a buoyant Dollar saw us give up all our gains and more with a fall to R18.27. 
• Besides for our continuing fallout with the US at a political level, and what this could mean for our participation in the AGOA trade agreement, there’s not a whole lot to report on the local front.  Eskom warning yesterday that they might have to implement Stage2 load shedding at short notice would not have helped but luckily actual load shedding has been avoided so far while they try to bring six generating units back online after they were shut down for technical issues.  Yes, our exchange rate took some pain yesterday afternoon, but looking at the charts this can be attributed to moves in the Dollar as opposed to local headlines. 
• The Dollar was on the up yesterday which was bad news for the Rand.  Recent weeks have seen a very consistent narrative that has hurt the greenback, that being that Trump’s widespread tariffs would damage US economic growth while also stoking inflation, and these fears resulted in the Dollar Index falling over 6% since late January to touch 103.21 last week.  But a combination of factors have questioned the accuracy of that narrative in recent days, and with the Dollar Index jumping to 104.37 yesterday which sealed our fall to R18.27.
• The Dollar has found support from three sources, those being the FED, US market data and Donald Trump.  At last week’s FED policy meeting Chair Jerome Powell caught the market’s attention when he described any tariff driven inflation as a once-off, short lived upwards pressure on prices, and nothing that comes near to what the world experience in the post-COVID years.  Then yesterday we got S&P Global’s flash US composite reading which looks at manufacturing and services activity, and which jumped from 51.6 to 53.5 with particular strength in the more important services component. 
• This data release eased fears around the US economy and then Trump said that not all of the countries currently lined up for a new round of tariffs next Tuesday (April 2^nd) would actually get tariffs, and while some countries will be exempt there is also the possibility that certain companies or industries could also be exempt across the board.  Of course Trump has been known to change his mind at the last minute, but for now it looks like a more measured approach could be taken next week and that coupled with better than expected services data sent the Dollar Index higher. 
• The following is from Reuters and reminds us that volatility could still lie ahead:  The Dollar jumped to multi-week highs against the Euro and Yen on Monday after data showed US business activity picked up in March and reports that US President Donald Trump will be flexible with upcoming tariffs. “A wave of cautious optimism is washing across foreign exchange markets on hopes that next week’s US tariff announcement will prove less extreme than had previously been feared,” said Karl Schamotta, chief market strategist at Corpay in Toronto. That said, “traders are avoiding big directional positions, given that the US administration’s tariff plans are still likely to touch off another round of retaliatory strikes from major trading partners – damaging the US and global economies, and triggering more turbulence in currency markets. Volatility levels look likely to remain elevated.”
• Local market data today sees our leading business cycle indicator at 9:00 followed by our Q1 2025 consumer confidence reading at 10:00. 
• Possible USD mid rate trading ranges in the Rand today are R18.15 and R18.45.

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