The Daily Forex Market Report

Good morning

A frantic day in the equity market yesterday as little known Chinese AI firm DeepSeek forced a re-think on the status quo with their claims of a much cheaper alternative to ChatGPT and the other leading AI names.   

These are the mid rates at 5:55 today:

Market News

• Volatility was the name of the game yesterday and it came from a number of sources.  Unfortunately for the Rand our local headlines overruled much of what was going on abroad with the Rand falling from R18.41 to the Dollar at the open to R18.85 now.
• Yesterday had many moving parts and it’s quite the task trying to keep up with all the goings on, but the end result has been a terrible start to the week for our currency.  The first headline of the day came from the White House with Donald Trump readying his team to slap tariffs and sanctions on Colombia in response to the South American country refusing to accept their deported illegal immigrants from the US.  Columbia’s resistance was fleeting, and in a “blink and you’ll miss it” type stand-off it was immediately announced that an agreement has been reached, and that the tariffs were off.  The Dollar initially rose on the tariff threats and then retreated when they were called off.
• From a global perspective then came the day’s biggest headline when Chinese AI lab DeepSeek claimed that they have developed a tool with equal capabilities to the likes of ChatGPT, but it only took them two months to build and cost around $6m.  This is a tiny fraction of the billions of Dollars being spent by US hyperscalers and a shockwave of significant proportions reverberated around the market, and the tech sector in particular.  Very little is known about DeepSeek, and no doubt there’s a mad scramble for verified information going on in Silicon Valley, but with American tech valuations being called into question that saw the Dollar Index fall while alternative safe havens like the Yen and Swiss Franc advanced.
• The equity market is well known to overreact in both directions and the following from Reuters points out that yesterday’s moves were based on sentiment rather than fact:  “A lot of people seem to be taking a pretty large leap here that DeepSeek is unsettling the major tech names that’s going to lead to a rout in equities, and a rout in equities is going to cause the FED to be supportive,” said Eugene Epstein, head of structuring for North America at Moneycorp in New Jersey. “I think it’s a number of steps too far but given the fact that all these different asset classes are moving in the same classical safe haven direction, it seems that’s the current rationale. Whether that rationale makes sense or not is, I think, highly debatable.”
• It was interesting that on a major risk-off day the Dollar Index was pushed lower but that didn’t help the Rand one bit as our domestic headlines sent us tumbling.  Last week the ANC surprised everyone by announcing that Cyril Ramaphosa has signed the land expropriation bill into law, everyone including the other multi-party GNU participants.  Political conflict has been the result, and with the DA declaring an official dispute while calling for a reset of the coalition’s relations with the ANC this heightened uncertainty has been bad news for the Rand.  2025 was looking very promising for SA but this development is suddenly a major hurdle for us to overcome. 
• Local market data today sees our leading business cycle indicator at 9:00. 
• Possible USD mid rate trading ranges in the Rand today are R18.70 and R19.00.

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