The Daily Forex Market Report

Good morning

It has finally arrived.  Not exactly the last working week for the year but definitely the last week for my forex report.  Hopefully, we see some movement in the Rand over the next five days as last week we were stuck in a narrow trading range which made reporting on events rather dull.

These are the mid rates at 7:10 today:

Market News

• There was a flash of activity on Friday afternoon when the US jobs report dented the Dollar and allowed us to hit R17.96 but unfortunately, our move below R18.00 was very short-lived as we almost immediately moved back up to R18.03 where we closed for the week.
• Last week’s main event came late on Friday afternoon with the monthly US jobs report pulling the Dollar Index down to 105.50, but only for an hour or two before the index recovered all its losses and then some.  The report didn’t deliver any major surprises as 227 000 new jobs were added in October, higher than the 200,000 expected but not a massive beat to the upside, while their unemployment rate ticked higher from 4.1% to 4.2% as expected.  This slight worsening in unemployment all but sealed another 25bps interest rate cut by the FED next week which was why the Dollar sold off while triggering the Rand’s jump to R17.96.
• Bets of a FED rate cut on the 18^th jumped to 85% after the jobs report but unfortunately for the Rand we then got the University of Michigan consumer sentiment report with sentiment forecast to increase from 71.8 to 73.0 but it moved even higher to 74.0.  This the highest reading since April, and also marks the fifth month of gains in a row, and while the implications are that US consumers are very bullish about their economy and spending power it also suggests that increased spending could result in higher inflation and therefore fewer FED cuts next year than are currently pencilled in.  The Dollar jumped onto the front foot while sending the Rand back above R18.00.
• As we drift towards the end of the year, there are just two more risk events that the Rand needs to navigate: the US inflation report this Wednesday and then the FED’s policy announcement next Wednesday.  The following from CNBC suggests that CPI this Wednesday will struggle to alter the FED’s thinking. Still, it could impact on how many cuts they will deliver next year:  While the case for the rate cut seems sealed, investors have one eye on US consumer price inflation data due this week. “A hot US CPI print may not necessarily derail a cut at next week’s FED meeting, but it would affect the level of implied cuts priced for FED meetings from March 2025 onwards and this is where the US Dollar may take its directional steer,” said Chris Weston, head of research at Australian online broker Pepperstone.
• Dollar strength has made life difficult for the Rand over recent weeks. Still, the following from Reuters suggests that with everyone bullish on the Dollar that could leave the door open for a pullback should any unexpected headlines materialise:  Morgan Stanley analysts recommend being short US Dollars into the year-end, calling it a “pain trade” for markets that are widely and heavily long the currency. “Much of the US Dollar-positive story is in the price — from strong US data to trade and fiscal risks — and positioning is fairly long Dollars,” they wrote. “We sense investor sentiment, on the whole, is very constructive on the greenback, suggesting asymmetric risks for a ‘pain trade’.”
• No local market data today.
• Possible USD mid-rate trading ranges in the Rand today are R17.95 and R18.25.

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