The Daily Forex Market Report

20 November 2024

Good morning

So much for slipping past unnoticed, which in hindsight would have been the preferred outcome by far.  As mentioned in yesterday’s report the 19^th of November marked the 1000 day anniversary for Russia’s invasion of Ukraine and it also delivered a new development which had an immediate impact on the currency market.

These are the mid rates at 5:50 today:

Market News

• Fortunately yesterday’s major risk-off event has been quickly walked back but looking at the chart it is clear to see how headlines out of Russia sparked an immediate risk-off reaction.  We opened the day at R17.92 to the Dollar and drifted sideways for a few hours before falling to R18.16 in double quick time.  Most of these losses were reversed later on as we closed the day at R18.04 but it was a reminder that geopolitical tensions can strike at any moment. 
• The good news is that what looked like a major escalation in the Russia / Ukraine war has been tempered somewhat, for now.  In a quickfire chain of events Joe Biden recently approved the use of US made long range missiles by Ukraine which they symbolically took advantage of on yesterday’s milestone by firing 6 missiles aimed deep into Russian territory.  Reports suggest these missiles were intercepted, but in response Vladimir Putin approved an amendment to Russia’s nuclear doctrine which lowers the threshold for when the use of nuclear warheads is appropriate.  Risk assets like the Dollar shot up in response while the Rand fell. 
• Confirmation that Russia, the country with the world’s biggest nuclear arsenal, has lowered the criteria for when it deems the use of nuclear weapons as appropriate was a shock to financial markets and the Dollar reacted appropriately.  Scary as these headlines are the panic was quickly eased when Russian foreign minister Sergei Lavrov confirmed that Russia will do everything in its power to avoid a nuclear escalation while the US stated that they see no reason to adjust their nuclear doctrine despite Russia’s move.  Hopefully this is just a bit of high stakes sabre rattling and the Dollar Index has reversed all of its gains while the Rand has moved back towards R18.00. 
• Hopefully yesterday’s spike in geopolitical tensions is already behind us, and that the market can get back to setting price action based on more conventional headlines.  The Dollar will continue to be driven by speculation around how Trump’s expected policies could impact on the FED but with very little US economic data this week the Rand could well be driven by local headlines, and an action packed two days for us starts today.  The Reserve Bank delivers their final policy statement for the year tomorrow but before that we get our latest consumer inflation reading today as well as September’s retail sales report. 
• CPI is expected to fall from 3.8% to 3.6% according to Trading Economics but there are some analysts who feel a bigger drop to 3.3%, or even 3.0% is on the cards.  With the repo rate still up at very restrictive levels, and with our economy stumbling along at around 1% GDP growth, there is definitely a school of thought that says the SARB can afford to announce a 50bps cut tomorrow given that CPI is well below their 4.5% mid-range target.  The SARB however usually err on the side of caution so we’ll just have to wait and see how it all plays out, and how these developments impact on the Rand.    
• Local market data today sees our CPI report at 10:00 followed by retail sales at 1pm.
• Possible USD mid rate trading ranges in the Rand today are R17.85 and R18.15.

GLOBAL INVESTMENT OFFERING!!!

Foundation Fund Managers gives you the opportunity to invest in international shares which gives you direct access to owning the likes of Google, Mastercard, Amazon, Apple, Nvidia, Adobe, Ferrari, VISA, Microsoft or any other company listed on the London Stock Exchange, NASDAQ or NYSE.

We also offer local share portfolios with a bespoke selection of stocks listed on the JSE.   

For more information please contact Hadyn Little on:

084 910 8078 or [email protected]