The Daily Forex Market Report

Good morning

In 1972 economist Yale Hirsch devised the January Barometer with his predictive tool stating that “as the S&P500 goes in January so goes the year”.  The barometer has been correct 84% of the time since, and with the S&P500 up 3.2% as we go into the month’s final session things are looking positive for the rest of 2025!!!

These are the mid rates at 5:50 today:

Market News

• This week has had so many moving parts that it feels like a month’s worth of market watching has been crammed into the past 4 days, and we definitely aren’t done yet!!!  For the Rand the week started out badly as we fell to R18.86 on Monday, but things have steadily improved since with us briefly touching R18.43 late yesterday afternoon.  Hopefully our strengthening trend continues today.   
• The Rand is on the front foot but a quick read through various headlines suggest that further gains might be difficult to come by.  One of the market’s focal points is central bank policy and developments this week have been positive for the Dollar with the Dollar Index climbing to 108.13 over the past two sessions.  The short story is the FED left interest rates unchanged on Wednesday but while Jerome Powell said there is room for the FED to cut later in the year he also said that they are in no rush, and this differs from other central banks who lowered rates this week (including the SARB yesterday).  The ECB cut yesterday as expected but what caught the market’s attention was president Christine Lagarde confirming that they have not even started thinking about when to stop cutting, and the Euro fell back as a result. 
• The threat of imminent trade wars is also front and centre for the market with the Dollar benefiting as a safe haven asset whenever tensions are escalated.  Soon after taking office Donald Trump said he would hit Canada and Mexico with a 25% tariff on the 1^st of February while he’s also considering a 10% tariff on China, and yesterday he repeated the Canada and Mexico threats which dented their respective currencies while giving the Dollar a boost.  These proposed tariffs are due tomorrow so we could see concrete announcements coming later today which in all likelihood could be bad for the Rand.   
• The following is from Reuters:  The US Dollar edged higher against some of its peers including the Yen and Euro on Thursday as markets weighed fresh tariff threats, slower-than-expected US economic growth, and an interest rate cut by the European Central Bank. President Donald Trump on Thursday said the United States will put a 25% tariff on imports from Mexico and Canada, repeating his warning to the two countries which are top US trade partners. “When Trump says something is imminent, the market is reluctant to believe it or to fully embrace it until the orders are signed and the market was definitely caught off guard there,” said Adam Button, chief currency analyst at ForexLive in Toronto.
• On the local front South Africans welcomed the SARB’s third consecutive interest rate cut of 25bps yesterday, and while the central bank will probably hold things steady for a meeting or two there is still scope for further cuts in 2025 should our inflation rate stay in and around its current 3% level.  Another encouraging element of yesterday’s announcement was a prediction that imminent structural reforms in SA could boost our GDP growth to 3% by 2027 alongside lower inflation and lower interest rates.  Here’s hoping that this scenario modelling comes to fruition!!!
• Local market local market data today sees our December balance of trade at 2pm but the market will be focused on the US PCE inflation report at 3:30pm as this is the FED’s preferred measure of inflation and could have an impact on where the FED is headed next.
• Possible USD mid rate trading ranges in the Rand today are R18.40 and R18.70.

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