The Daily Forex Market Report

Good morning

Finally some good news out of the Middle East where the US and France have brokered a ceasefire between Israel and Hezbollah with the fighting having stopped in the early hours of this morning. The region remains extremely tense, but this is a big step in the right direction. 

These are the mid rates at 5:40 today:

Market News

• The Rand tried to remain steady yesterday but our resistance faded late in the day as we fell from R18.07 to R18.22 to the Dollar.  One would hope that the positive developments in the Middle East might dent the Dollar as a safe haven asset but no such luck for the Rand as yet.   
• The Dollar found support from two sources yesterday, those being Trump’s tariff threats and then the FED minutes later in the day.  On the tariff front Trump promised that his first day in office would see him impose a 25% fee on all imports coming from Mexico and Canada while also increasing all existing tariffs on Chinese goods by a further 10%, and while some analysts are debating whether he is using these threats as an early negotiating tool, or whether he will actually follow through with them, the impact on the currency market has been Dollar strength thanks to the resultant uncertainty.   
• The following is from Reuters and reminds us that Trump’s shoot from the hip approach will keep the currency market on its toes going forward:  A pledge by President-elect Donald Trump to impose tariffs on products from Canada, Mexico and China sent their currencies lower against the Dollar on Tuesday, renewing the spectre of trade wars and fanning uncertainty in other currency pairs. “I think we had a perfect example last night of why volatility is more likely under Trump,” said Jane Foley, head of FX strategy at Rabobank. “He can just put out a comment like that outside of usual US market hours that takes people by surprise. It leaves investors, everybody, scrambling to work out what this really means.”
• CNBC have put out an article looking at how uncertainty under Trump’s administration could impact the currency market and the following is from that article:  President-elect Donald Trump’s vow to implement additional tariffs on China, Canada and Mexico on day one of his presidency signals the start of a wild ride in currency markets, strategists say, warning it would be risky for investors to underestimate the impact on foreign exchange rates. “I think the first reaction here is that investors should get ready for a wild ride in FX volatility,” said Kamakshya Trivedi, head of global foreign exchange, interest rates and emerging markets strategy research at Goldman Sachs. “This is going to be something that we are all going to have to get used to. It is going to be volatile moves in FX markets because currencies are to some extent the primary means of responding to any sort of tariff announcement.”
• The Dollar’s second source of support yesterday came from the latest FED minutes which showed that the committee was in agreement that it is appropriate to lower interest rates in the US, but that the path to lower rates has not been predetermined.  The FED will assess the prevailing economic conditions at each meeting before making a call, and the inference that there could be meetings where they choose to leave rates unchanged was enough to give the Dollar a lift. 
• No local market data today and all eyes will be on the US PCE inflation report at 3:30pm which is the week’s last major event before the US closes for Thanksgiving Day tomorrow while Friday will be a non-event. 
• Possible USD mid rate trading ranges in the Rand today are R18.05 and R18.35.

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