The Daily Forex Market Report

Good morning

 

If last week was characterised by its lack of economic events, this week is the complete opposite.  Headlines from the US will include an inflation report, a Q2 GDP report, the monthly jobs report, a FED interest rate decision and earnings from Amazon, Apple, Facebook (Meta) and Microsoft.  And let’s not forget Trump’s tariff deadline on Friday!!! 

 

These are the mid rates at 7:10 today:

 

USD = R17.72	AUD = R11.64
GBP = R23.82	DXY = 97.67
EUR = R20.83	Brent Crude = $68.96 per barrel

 

Market News

 

• Plenty for the Rand to contend with this week, and already things are on the move, given the significant headlines from the weekend.  Dollar strength is at play, which isn’t great for the Rand, but risk-on sentiment is also swirling around so hopefully we can take our direction from the positive vibes out there this morning.  We open the week at R17.72 to the Dollar. 
• Donald Trump’s deadline for trade deals arrives on Friday, and while it’s highly unlikely that deals will be struck with every country on his list, the good news is that the major players are suddenly being dealt with.  Last week, we saw a deal signed with Japan, and then yesterday, it was announced that the US and EU have come to a trade agreement. This development comes with a big sigh of relief for the market, given that Europe was readying countermeasures should it be slapped with a 30% tariff on Friday.    
• The market hates uncertainty, but week after week, we are seeing certainty make a welcomed return, something that has not been lost on the stock market with the S&P500 and Nasdaq Indices setting record high after record high.  Yesterday’s US/EU trade announcement takes another large chunk of uncertainty off the table, and while the Dollar Index is on the up, the broader risk-on sentiment is also pushing US futures deep into the green while the Rand is flat at R17.72.  In terms of the deal’s specifics a 15% tariff has been agreed while the EU will purchase $750bn worth of US energy, invest $600bn into US-based projects and also purchase an unnamed amount of US military equipment, in short it’s a massive deal. 
• The following is from Reuters and talks to the market’s newfound clarity when it comes to US trade deals:  The Euro gained on Monday following the announcement of a framework trade agreement between the United States and the European Union, the latest in a flurry of deals to avert a global trade war. “It could be a positive week, just purely from the fact that now we know the rules of the game, if you like,” said Rodrigo Catril, senior currency strategist at NAB. “Now that there is more clarity, you would think that not only in the US, but around the globe, there will be a little bit more willingness to look at investment, to look at expansions, and to look at where the opportunities are.”
• Not only is a US/EU trade deal in the bag, but senior US and Chinese officials meet in Stokholm today, not to iron out their trade deal but rather to negotiate what looks like a 90 day extension to their current truce which ends on the 12^th of August.  As tariff uncertainty fades a little more with every headline one would think that a FED rate cut on Wednesday would become more of a possibility, but this is not that case as robust US data in recent weeks means there is no economic crisis for the FED to fix with lower rates, and as such the market is betting that the FED will cut in September at the earliest which is supporting the Dollar.
• Locally we also have an interest rate announcement this week, and if the experts are to be believed, it looks like we could be in for a cut on Thursday.  Our recent inflation report came in at 3%, lower than the expected 3.1%, and with inflation sitting comfortably below the SARB’s 4.5% mid-range target since August last year there is a compelling argument for them to deliver a much-needed cut.  What happens from there is up for debate with Old Mutual of the view that this would be the last rate cut this year while Investec and Goldman Sachs feel the SARB could cut at every meeting between now and December, but as long as they cut this week, that is all that us consumers are hoping for!!!
• No local market data today. 
• Possible USD mid rate trading ranges in the Rand today are R17.60 and R17.90.

 

 

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