Forex Report

Good morning

It’s probably quite difficult to wipe the smirk off Nvidia CEO Jensen Huang’s face at the moment, this as the arrival of China’s Deepseek AI model in January was touted as the death knell for Nvidia’s rampant growth forecasts.  But yesterday Saudi Arabia committed to buying “several hundred thousand” of their most advanced GPU’s over the next five years which is a monster of an order.   

These are the mid rates at 5:55 today:

Market News

• Internationally things have improved dramatically over the last few days but not so much on the local front which translated into a direct hit for the Rand.  Yesterday’s developments saw us fall to R18.44 to the Dollar, but thankfully news out of the US has allowed us to pull things back to R18.32 this morning. 
• The Rand suffered a double body blow from local headlines yesterday which is unfortunate as price action over May thus far had seen us improve from R18.69 at the start of the month to R18.09 last Friday, a trajectory that suggested a look at R18.00 and below could be on the cards.  First came our unemployment rate which was expected to worsen, but not by as much as it did in increasing from 31.9% to 32.9%, and then came news that load shedding is back with Stage 2 to be implemented from 4pm to 10pm between yesterday and Thursday.  Granted, this is not the worst load shedding news imaginable, but we all know that if Eskom is struggling then the severity of our power outages can ramp up in an instant, and the end result was a fall to R18.44.
• The Rand was already on the slide going into yesterday’s session, this as the Dollar Index reacted positively to news that the US and China have agreed to reduce their tariffs from 145% to 30% and 125% to 10% for 90 days respectively.  They have also agreed a framework through which further trade talks can proceed, and this much better than expected news was a major boost for stocks on Monday while also pushing the Dollar Index up to 101.91 as sentiment towards US based assets improved.  With a Bank of America survey showing that prior to the weekend’s US/China talks fund managers had cut their Dollar positions to the lowest since May 2006 this explains the Dollar’s recovery on the back of thawing trade tensions. 
• USD was on the up but then came yesterday’s US CPI report which, fortunately for the Rand, weighed on the Dollar thus helping us claw back ground from our earlier fall to R18.44.  At the headline level inflation dropped from 2.4% to 2.3%, its lowest level since February 2021, and while the core reading remained steady at 2.8% the fact that there were no nasty surprises despite April’s tariff turmoil suggests that the FED is still on track to cut US interest rates later this year which is Dollar negative.  It will be interesting to see if inflation remains well behaved over coming months, but for now the hard data out of the US is not causing alarm bells to ring. 
• The following from CNBC talks to yesterday’s dip in the Dollar, but it also suggests that the greenback could find further support as trade headlines continue to improve which would not be good for the Rand:  The US Dollar stabilised on Wednesday following its biggest decline in more than three weeks overnight, with softer-than-expected US consumer inflation data bolstering the case for FED easing just as global trade tensions cool. “Despite the easing of the USD overnight, we consider there is more upside to the USD in the near term as market participants reassess the outlook for the US and global economies following the temporary US‑China trade deal,” Commonwealth Bank of Australia analysts wrote in a client note, predicting a 2-3% rise in the Dollar Index over “the next few weeks.”
• No local market data today. 
• Possible USD mid rate trading ranges in the Rand today are R18.15 and R18.45.

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