
The Daily Forex Market Report
January 28, 2025
The Daily Forex Market Report
January 31, 2025Good morning
With the multitude of headline grabbing events over recent weeks we have quietly arrived at the year’s first FED policy announcement today, and still almost nobody is talking about it. I suppose that there is a near 100% certainty that they won’t cut rates is why the meeting has slipped so far under the radar.
These are the mid rates at 5:45 today:
USD = R18.68
|
AUD = R11.65 |
GBP = R23.27
|
DXY = 107.82 |
EUR = R19.50 |
Brent Crude = $77.28 per barrel |
Market News
- Monday was a shocker for the Rand with us falling to R18.86 to the Dollar but the good news is that yesterday saw what is hopefully the start of a sustained recovery, this as we strengthened to R18.66 early on and then held onto those gains for the rest of the day.
- Part of the Rand’s tumble on Monday can be attributed to risk-off sentiment as the emergence of DeepSeek’s reportedly cheaper AI model rocked the equity market and resulted in heavy selling, especially in parts of the US tech sector. While it’s way too early to declare the market’s reaction as completely unfounded there definitely is a feeling that things were overdone on Monday, and yesterday stocks bounced back thanks to cooler heads realising that DeepSeek is not going to depth-charge the entire AI industry. With equities nicely in the green this risk-on sentiment would have helped the Rand.
- The following from Reuters uses a colourful analogy when pointing out that if DeepSeek is legitimate, it could be a contribution to the world and not a disaster: Technology stocks regained ground on Tuesday, a day after a low-cost Chinese AI model rattled markets, while traders rotated back into the Dollar from safe-haven currencies. “The market’s initial response has been ‘sell first, understand later,'” said Stuart Dunbar, a partner at investment firm Baillie Gifford. “Short-term news flow and price moves don’t invalidate the potentially profound impact AI will have on the world. The advent of a much cheaper lightbulb didn’t signal bad news for lightbulb manufacturers or electricity companies.”
- Local headlines would also have helped the Rand yesterday with DA leader John Steenhuisen confirming that the DA is committed to its role in the GNU, and that leaving the coalition is not on their agenda. Cyril Ramaphosa agreed to meet with Steenhuisen, ostensibly for the DA to air its grievances around a succession of contentious laws that have been signed into effect and the consultation role that all parties in the GNU should be given on such matters going forward. Perceived threats to the GNU’s stability severely dented the Rand on Monday and so yesterday’s update would have helped ease these concerns.
- The rest of the week still holds a multitude of risk events, most notably any updates from Donald Trump on his proposed 25% tariff on Canada on Mexico plus 10% on China as soon as this Saturday, but today sees the FED policy announcement which should capture the market’s attention for a bit. The FED is not expected to cut US interest rates and there is no update to their “dot plot” today, but Chair Jerome Powell’s comments in the press conference will be closely watched when trying to understand the FED’s position on the Trump administration’s incoming policies.
- The following from CNBC underlines the consensus view that tonight will see no change from the FED: Despite the White House pressure, central bankers should hold firm and take a break from policy changes, said former Dallas FED President Robert Kaplan. “It’s the right call to stay steady. Inflation progress is maybe not stalled but it’s going sideways, and you’ve got four or five big structural changes underway and about to unfold. The right thing to do is to do nothing in this meeting.”
- No local market data today.
- Possible USD mid rate trading ranges in the Rand today are R18.55 and R18.85.
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