The Daily Forex Market Report

Good morning

On Friday afternoon the return of load shedding was announced out of nowhere, and after 10 months of uninterrupted power bliss South African’s were suddenly scrambling to charge their devices.  The Rand slipped a little, but then came confirmation of the well publicised Trump tariffs and boy have we taken a direct hit. 

These are the mid rates at 5:45 today:

Market News

• It’s still early in the trading day but things are already proving to be very challenging for the Rand.  On Friday we suffered a small knock thanks to the load shedding headlines, this as we fell from R18.52 to the Dollar to R18.68, but we’ve plunged to R19.03 during the Asian trading session this morning and the rest of the day/week is looking tricky at best.
• There’s only one headline driving price action in the currency market right now and that is the US government’s confirmation that a 25% tariff will come into effect against Canada and Mexico at midnight tonight while China will attract a 10% tariff.  In keeping with the build-up to this trade war escalation the reasons given for the tariffs is to protect America from the flow of illegal immigrants as well as drugs (fentanyl),  and even though this move comes as no surprise the fact that they are going ahead so soon into Trump’s presidency is severely rattling the market. 
• Risk-off sentiment is firmly in control with the Dollar Index surging as a safe haven asset while all other currencies are wilting.  Maybe the market thought that the threat of tariffs would be used by the Trump administration to guide negotiations for a period before actually being imposed, but with Trump saying that American’s might feel some short term pain (inflation) in their pursuit of righting historical trade imbalances it is now crystal clear that the strategy is to levy tariffs first and talk later.  Canada has already announced retaliatory tariffs with Mexico likely to follow suit soon, and we find ourselves in a delicate situation that could see further losses for the Rand until some de-escalation in this trade war tit-for-tat is announced. 
• The following is from Reuters:  The Dollar surged on Monday, pushing its Canadian counterpart and Mexican Peso to multi-year lows while China’s Yuan slumped to a record low in offshore trading after US President Donald Trump kicked off a trade war by imposing sweeping tariffs. The Dollar’s gains were broad, with the Euro also dropping to a more than two-year low and the Swiss Franc – despite typically acting as a safe haven – sliding to the weakest since May. “Trump’s early strike, just two weeks into his four-year term, is likely to hit investor confidence,” said Mansoor Mohi-uddin, chief economist at Bank of Singapore. “The consensus – including ourselves – had expected US tariffs would only threaten the economic outlook in the second half of 2025 after lengthy negotiations first between the US and its main trading partners.”
• While there are quite a few things going on this week including the monthly US jobs report, manufacturing and services PMI’s and multiple FED members speaking the market will have eyes only for the tariff headlines.  Trump is reportedly meeting with the leaders of Canada and Mexico later today and the Rand is hoping that an early truce can be found, but in speaking to reporters yesterday he played down the chances of any changes to the tariff plans being announced so right now any hope seems to be very slim.
• Local market local market data today sees our January manufacturing PMI at 10:00 followed new vehicle sales for the month at 2pm
• Possible USD mid rate trading ranges in the Rand today are R18.85 and R19.15.

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