The Daily Forex Market Report

Good morning

With all the hype surrounding Donald Trump’s return to the White House, and what this might mean for global trade, inflation and financial markets as a whole, you’d be forgiven for not knowing that there is a FED policy meeting this time next week.  This is the first time in a long time that zero column inches have been allocated to imminent FED policy speculation. 

These are the mid rates at 5:45 today:

Market News

• The calm after the storm is what looks to be playing out in the currency market and the Rand is improving nicely.  We opened yesterday at R18.60 to the Dollar, slipped to R18.68 by midday but then went on a run to hit R18.48 as the day’s best level.  We open at R18.50 this morning and hopefully further gains lie in our immediate future!!
• There is no doubt that Trump’s actions, or more specifically his lack of action, is helping the Rand at the moment, but the World Economic Forum is currently taking place in Davos and the following comments from SARB governor Lestja Kganyago could also have given us a small boost:  “Depending on who is forecasting, (SA GDP) growth varies between 1.6% and 2% (this year). We think it would be closer to 2% than 1.6%.  The structural reform agenda has gained momentum and it has been given impetus by this government of national unity, with a very clear focus on taking SA’s economic trajectory to the next level.”
• Encouraging words from our well respected central bank governor but most of the Rand’s gains yesterday came as a result of Dollar losses.  The build up to Trump’s inauguration was characterised by a strengthening Dollar, this as the market was gearing up for a deluge of tariff announcements, but apart from a few vague comments along with the term “we’re thinking about” there has been nothing concrete thus far.  The market is increasingly taking this as a sign that a more considered approach will be taken by the new administration, and the result has been an unwinding of those long Dollar positions while equities have enjoyed healthy gains.   
• The Dollar did enjoy a brief spike when Trump said that he was thinking about levying a 10% tariff on Chinese imports as soon as the 1^st of February, but once again this was just a passing comment and had no clear specifics.  Trump said that China’s involvement in shipping ingredients for the opioid drug fentanyl to Mexico and Canada was the reason why this 10% tariff would be considered, but while this reasoning is nothing new the much smaller size of the tariff when compared to his campaign promises definitely caught the market’s eye in a good way and any Dollar strength quickly evaporated.    
• The following is from Reuters and suggests further Dollar weakness in the absence of actual tariff announcements:  The Dollar drifted slightly lower on Wednesday in indecisive trading as a lack of clarity on President Donald Trump’s plans for tariffs kept financial markets guessing. “10% tariffs on China imports would be far below the 60% rate he mentioned in his campaign,” said Alvin Tan, head of Asia FX strategy at RBC Capital Markets. “On top of this is the general sense that Trump is not pursuing maximalist trade protectionism in his early actions, but appears to be positioning for trade negotiations. Altogether these suggest that the US Dollar could drop further.”
• Local market data today sees our CPI readding at 10:00 which is forecast to increase from 2.9% to 3.1%, and then at 1pm we get our November retail sales report. 
• Possible USD mid rate trading ranges in the Rand today are R18.35 and R18.65.

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