The Daily Forex Market Report

Good morning

Google shares jumped 6% yesterday, adding $136bn in market cap to the tech giant as they announced a breakthrough in their quantum computing chips. Interestingly, however, their new “Willow” chip is only step 2 on a 6-step program to harness the powers of quantum computing, and as things stand, it has no practical use or monetisation opportunity.

These are the mid rates at 5:45 today:

Market News

• After Monday’s cracker start to the week it looked like we were about to give most of those gains back yesterday, this as we opened at R17.82 to the Dollar and slipped to R17.90.  But fortunately the Dollar Index suffered a late knock and we find ourselves at R17.77 this morning.
• The Rand has been thankful for positive headlines out of China in recent days with Chinese authorities relaxing the wording around their monetary policy for the first time in 14 years while also announcing that The People’s Bank of China has resumed buying gold to add to its vast reserves after pausing all purchases in May.  Their willingness to set policy at an “appropriately loose” stance so as to “vigorously” boost consumer activity was great news for all currencies linked to trade with China while the PBOC stepping back into the gold market pushed the precious metal higher which is also a tailwind for the Rand.
• The following is from Business Day:  According to Matete Thulare, RMB’s head of forex execution, the Rand’s performance, with the overall better emerging-market performance, was driven primarily by a firmer gold price. “This followed the Chinese central bank’s resumption of gold purchases after a near six-month break. Additionally, China’s announcement of a potential shift in monetary policy as early as next year, aimed at boosting the economy, also contributed to the better performance,” said Thulare.
• The Rand is thankful for headlines out of China but today is “Inflation Wednesday” with both our local and US CPI reports able to move the market.  On the local front Stats SA surprised the us last month when they confirmed our inflation rate had fallen to 2.8%, a level which triggered speculation that the Reserve Bank could contemplate cutting interest rates by 50bps given how far below their 4.5% mid-rate target we had fallen.  That speculation proved to be unfounded but it will be interesting to see where CPI comes in today, and what that might mean for the SARB.
• But today’s main event is definitely the US CPI report with forecasts suggesting an uptick in inflation which could support the Dollar.  The following is from CNBC:  The Dollar traded close to a two-week high versus the Yen on Wednesday ahead of a highly anticipated reading of US inflation that could provide clues on the pace of FED interest rate cuts. Economists expect both headline and core consumer prices to have risen 0.3% in November, from previous increases of 0.2% and 0.3%, respectively. “Should this scenario materialize, there could be concerns that the FED may not be able to cut rates as quickly as hoped, potentially benefiting the US Dollar,” said James Kniveton, senior corporate FX dealer at Convera.
• Local market data sees our inflation report at 10:00 followed by October’s retail sales at 1pm.  The US CPI report is out at 3:30pm.
• Possible USD mid rate trading ranges in the Rand today are R17.65 and R17.95.

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