The Daily Forex Market Report

Good morning

Welcome back to earth NASA astronauts Butch Wilmore and Suni Williams who flew to the International Space Station in June for an 8 day mission but got stranded there due to concerns around their Boeing Starliner spacecraft.  They safely splashed down in a SpaceX Dragon capsule yesterday, 286 days later!!!

These are the mid rates at 5:55 today:

Market News

• Our exchange rate was also in descent yesterday but stopped just short of a key threshold as we opened at R18.10 to the Dollar and made it to R18.01 during the morning session.  Unfortunately we didn’t manage to break below R18.00 but with momentum on our side maybe that milestone isn’t too far away, maybe. 
• Another day another repeat of the recent theme, that being a combination of Euro strength and Dollar weakness setting the stage for an ever-improving Rand / Dollar exchange rate.  On the Euro front the German parliament approved the incoming government’s plans for a massive spending overhaul which will both shore up their defence and infrastructure sectors while also promoting German and European economic growth.  The Euro reacted positively even though the approval was expected, and with the common currency climbing to a fresh five month high against the Dollar that pushed the Dollar Index lower allowing us to hit R18.01.   
• Unfortunately our run at R18.00 and below didn’t stick but with the FED delivering their latest monetary policy statement tonight, complete with an updated summary of economic projects plus the quarterly “dot plot”, there is much for the Dollar to be concerned about.  That they will leave US interest rates unchanged is all but certain and so their language around where they see the US landscape going is of great importance to the market, and while we can expect Chair Powell to emphasis that the FED is in no hurry to adjust rates amid heightened uncertainty the market will be hanging on his every word when it comes to revisions around economic growth and inflation expectations. 
• The FED’s dot plot will be closely watched to see if December’s projection of two rate cuts this year is still their base case, but, as mentioned above, the summary of economic projections is also of vital importance.  December’s statement saw US GDP growth in 2025 expected to come in at 2.1%, the US unemployment rate climbing to 4.3% by year end and inflation coming down to 2.5%, also by year end.  Concerns about the US economy due to Trump’s tariff policies have seen the Dollar Index fall by 6% since late January and if the FED either reduces their GDP forecast, or increases their inflation forecast, or both (stagflation) then the Dollar could be in for more pain.   
• As is usually the case, the market is hoping for some clear direction from the FED tonight but in all likelihood Jerome Powell will be able to perform a balancing act so as to keep all options on the table.  The following from Reuters underlines just how difficult it is to know which way the US is headed:  “Either the economy remains resilient and high inflation keeps the FED mostly on hold, or the slashing of government employment combined with a trade uncertainty-induced freezing in private-sector hiring leads to a sharp deterioration in the labour market that necessitates a steeper path of cuts,” Matthew Luzzetti, Deutsche Bank’s chief U.S. economist, and his team wrote. “Divining which path is correct is not easy.”
• Local market data today sees our latest CPI report at 10:00 with forecasts expecting inflation to tick higher from 3.2% to 3.3%, and then at 1pm we get our January retail sales report. 
• Possible USD mid rate trading ranges in the Rand today are R18.00 and R18.30.

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