The Daily Forex Market Report

Good morning

Earlier this year, SA welcomed the news that ratings agency S&P Global had upgraded our credit rating. Despite all the doom and gloom out there, could we be in for more good news later this month? 

These are the mid rates at 5:50 today:

Market News

• Progress towards a Middle East peace deal resembles a chameleon wobbling along a thin stick at the moment, rocking back and forth with actual movement difficult to come by.  The Rand, in turn, is experiencing good and bad moments thanks to the ebb and flow of news headlines, and while yesterday started off on a positive footing, with us hitting R16.24 to the Dollar, things quickly turned sour as we fell back to R16.51.  But we started the week at R16.60, so maybe some progress is actually being made…  
• As has become the norm of late, developments in the Iran war have oscillated from positive to negative on a daily basis, and the impact on the currency market has been clear to see.  Monday started the week on a negative footing with Donald Trump’s Project Freedom, an initiative aimed at assisting trapped ships through the Strait of Hormuz, ending in missiles being fired despite the month-long ceasefire.  The Rand fell to R16.87, and oil prices spiked. 
• But on Tuesday and Wednesday, we heard of a one-page peace memo that looked to be the start of a proper de-escalation of tensions, and with speculation of the war’s end mounting, that saw Brent Crude fall from $114/barrel down to $96 while the Rand went on a charge to R16.24.  Presumably, peace talks are ongoing but yesterday saw the sudden resumption of missile attacks from both sides, which was all the market needed to give back most of its earlier gains, with Brent climbing back above $100/barrel and the Rand falling to R16.51.  We’re told the ceasefire is still in place, but with missiles flying twice in one week, the market is starting to take this arrangement with a pinch of salt. 
• The following is from CNBC and points to a repricing of risk despite all the talk of an imminent end to the war:  The Dollar started Friday’s Asian session on a firm footing against most major currencies after renewed hostilities broke out between the US and Iran.  The US and Iran exchanged fire and traded ‌barbs again on Thursday, piling fresh pressure on a fragile month-long ceasefire as Iran reviews Washington’s proposal to end the war. “The path towards a lasting agreement is anything but linear,” wrote Chris Weston, head of research ​at Pepperstone.  “Traders have had to rethink the assumptions on the trajectory of the conflict and the normalisation of vessel flows through Hormuz that had been made over the last couple of sessions.”
• Little to no progress on the international front then, but locally we saw an encouraging report from ratings agency Moody’s on Wednesday, who were very complimentary about SA’s commitment to not only stabilising debt, but then to start chipping away at it.  Moody’s is scheduled to release its latest credit rating this month, and the tone of its report suggests that an improvement is in the offing.  We’ll just have to see if that is a change of our outlook from stable to positive, or if they will reward us with an actual ratings upgrade, but either way, this could be a positive event for Rand. 
• The following is from MoneyWeb:  South African government debt is still on track to have peaked despite the Iran war, Moody’s Ratings said in a new report that endorsed the nation’s focus on reform and prudent public finances. “Improving fiscal performance and steady reform momentum support our view that government debt will stabilise this year before gradually declining,” the ratings agency said in a note on Wednesday. “This credit-positive shift is supported by stronger revenue, greater spending restraint and improving funding costs.”
• Local market data today sees our foreign exchange reserves at 8:00 
• Possible USD mid rate trading ranges in the Rand today are R16.35 and R16.65.

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