The Daily Forex Market Report

Good morning

Yesterday marked the second month since hostilities began in the Middle East, a conflict that has plunged the world into its biggest energy crisis ever.  Our government also announced that they are extending their fuel levy relief into May, but that it will start coming back in June, so things seriously need to improve between the US and Iran soon!!!

These are the mid rates at 5:50 today:

Market News

• Unfortunately there has been no sign of an end to the Middle East tensions and as such energy prices remain elevated, the Dollar Index is on the front foot and the Rand is under pressure.  We did have a brief moment of hope on Monday, and the Rand jumped from R16.64 to R16.45 to the Dollar, but those hopes were soon dashed and we fell back to R16.64 yesterday.  We go into today at R16.56 with the Rand not only keeping an eye on the war but also on central bank activity.
• As mentioned, while we were enjoying the long weekend on Monday the Rand was also enjoying a move stronger, this as despite cancelled peace talks over the weekend the Iranians then presented the US with a proposal aimed at achieving a peaceful outcome, but in stages.  The plan wanted the US to give guarantees on not restarting the war should Iran open the Strait of Hormuz, and once this first phase is complete they could then move on to discussions about Iran’s nuclear program, but while the Rand responded well to the headline we then fell equally quickly when Donald Trump rejected the proposal. 
• Of course the currency market will continue to be driven by Middle East developments but in a refreshing change we also have a number of central banks reporting this week and some analysts suggest that this could be a headwind for the Dollar.  The US labour market is stable but inflation is above their 2% target, and slowly moving higher thanks to the war, and so the market is pricing in a 100% chance that the FED leaves rates unchanged today while also sticking to their “wait and see” messaging.  But we’ve already seen the Bank of Japan narrowly vote against a rate hike yesterday while messaging from the Bank of England and European Central Banks tomorrow could point to hikes as soon as June or July, language that might boost their currencies while denting the Dollar.   
• Messaging from the FED’s meeting tonight will be important but the market is also looking for any clues from Jerome Powell whose term as the FED Chair ends in May, but his tenure as a FED member still runs for another 2 years.  Traditionally the outgoing Chair will resign as a FED member immediately but Powell has stated his desire to stay on should he fear for the FED’s independence, so it will be interesting to hear how he lays out his plans and what that might mean for the currency market. 
• Very little on the local scene to report other than we have two more days to get through until the next long weekend!!! 
• No local market data today. 
• Possible USD mid rate trading ranges in the Rand today are R16.45 and R16.75.

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