The Daily Forex Market Report

Good morning

French Prime Minister Michel Barnier has been ousted by a vote of no-confidence.  The life-long politician will probably not attend the government’s Christmas party but that shouldn’t detract from the festivities as by his own admission he “is not a fun guy”, and he has little time for the “bluster” of his younger colleagues.

These are the mid rates at 5:45 today:

Market News

• There’s a definite sense in the currency market that the year is drawing to a close as the Rand has been range bound this week with very little out there to move the dial in either direction.  We opened yesterday at R18.14 to the Dollar and then bounced between R18.18 and R18.09 for the rest of the day.
• The collapse of the French government is grabbing all the headlines but while Europe’s second largest economy has plunged into political uncertainty the Euro has held up remarkably well, probably because this widely telegraphed event was already priced into the market.  Barnier is expected to table his resignation to President Emmanuel Macron today but with some analysts suggesting that it could take weeks, or even months before a new prime minister is announced, it appears that we could be in for a drawn out process.  With the Euro actually gaining ground yesterday despite the latest developments perhaps the currency market has already moved on.
• Looking at the US the Dollar Index drifted sideways yesterday which is the reason why we are seeing very little activity in the Rand.  There were a few items for the market to digest including the privately run ADP jobs report, a US services PMI reading as well as FED Chair Jerome Powell speaking at an event but none of these had any meaningful impact on the Dollar as the market waits for tomorrow’s monthly jobs report.  Bets of a FED rate cut in two weeks’ time have increased to 78% which has seen the Dollar Index slip ever so slightly, but with Jerome Powell saying that the FED can afford to move cautiously thanks to the strength of the US economy the uncertainty around further FED moves has kept a floor under the greenback.
• The following is from Reuters and suggests that any Dollar weakness around the upcoming FED announcement could be temporary:  In the United States, the Dollar Index was flat at 106.33. Wednesday’s data did not shake expectations of an interest rate cut later this month. “It’s possible the FED cuts again in December, which can put tactical pressure on the Dollar because the market is long Dollars already,” said Vassili Serebriakov, FX strategist at UBS in New York. “But unless US data really deteriorates, which we don’t see at the moment, any weakness in the Dollar is going to be short-lived.”
• On the local front Moody’s has left our credit rating unchanged but while we would have preferred at least an upwards revision of their outlook the following from Business Day is encouraging:  Moody’s rating remains at Ba2, which is two notches below investment grade, and affirmed its “stable” outlook on the rating. Citi economist Gina Schoeman said the Moody’s report was no surprise. “But what is important is the tone. If you read the recent IMF report, S&P moving to a positive outlook, Fitch retaining its rating and now Moody’s, there is a more positive and constructive slant to what they are saying — but also an early days, wait and see.”
• Local market data today sees our Q3 current account at 11:00
• Possible USD mid rate trading ranges in the Rand today are R18.05 and R18.35.

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