The Daily Forex Market Report

Good morning

We finally had some movement in our exchange rate with the Rand breaking out of its well defined trading range last Friday afternoon.  Unfortunately however the direction of this move was not what we were hoping for. 

These are the mid rates at 6:05 today:

Market News

• Most of March had seen the Rand drifting sideways in the R18.20’s to the Dollar but that changed late last week with our exchange rate falling to R18.44.
• The Rand’s status as a risk asset finally came back to hurt us on Friday after defying conventional thinking for weeks on end.  Donald Trump’s disruptive trade policies have been spooking the market since late February with stocks baring the brunt of the uncertainty driven risk-off sentiment.  The Dollar has been curiously weak over this period with concerns around a combination of low US growth and higher inflation outweighing it’s traditional alure as a safe haven asset, and with the Dollar coming under pressure that had allowed the Rand to remain relatively strong despite the poor risk sentiment.  But that changed on Friday.   
• The market’s attention is firmly fixed on this Wednesday, now known as Liberation Day,  when the White House is scheduled to announce widespread reciprocal tariffs on all countries that levy tariffs on US goods, but on Friday two market data reports definitely rocked the boat more than a little.  Personal consumption expenditure (PCE) is the FED’s preferred measure of inflation and while the core PCE reading was expected to come in at 0.3% on a monthly basis and 2.7% annually the actual numbers were slightly higher at 0.4% and 2.8% respectively.  At the same time a separate report showed US consumer spending came in below expectations at just 0.1% growth, and this combination of higher inflation and subdued growth was enough to send equities sharply lower while denting the Rand. 
• If the Rand was hoping that we’d get some headline driven relief over the weekend that hope was misplaced as for now it looks like Trump is pushing ahead full steam in his preparations for new tariffs on Wednesday.  There have been a procession of trade talks between the US and many other countries over recent days, surely with the intention of gaining some sort of tariff reprieve, but yesterday Trump said “you’d start with all countries. Essentially all of the countries that we’re talking about.”  Any hopes of favourable announcements were dashed and as things stand it looks like more pressure for the Rand over the coming days. 
• Locally things aren’t much better as tomorrow’s deadline for our budget approval looms large, but with no resolution within the GNU in place it remains unclear as to how this standoff is going to play out.  In a worst-case scenario this disagreement could put an end to the GNU experiment with the DA and other parties walking away from the government structure, a scenario that would surely be bad for the Rand, so the week ahead is shaping up to be a very important one both home and abroad. 
• Local market data today sees our private credit extensions at 8:00 followed by our balance of trade at 2pm. 
• Possible USD mid rate trading ranges in the Rand today are R18.30 and R18.60.

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