The Daily Forex Market Report

Good morning

A surprise from our central bank hurt the Rand last week and resulted in a move weaker in our exchange rate that was quite dramatic, so here’s hoping that further central bank surprises do not lie in wait for us this week. All eyes will be on the FED on Wednesday night…

These are the mid rates at 5:55 today:

USD = R16.72

AUD = R11.71

GBP = R22.33

DXY = 101.20

EUR = R19.07

Brent Crude = $92.71 per barrel

Market News

• The good news as we go into the new week is that Middle East headlines have improved, which means a return of risk-on sentiment is seeping back into the market, and with it the Rand is gaining ground, but things looked very different on Friday as we fell to R16.94 to the Dollar, which was our worst level since early April. We start today somewhat improved at R16.72, but while geopolitical headlines have improved, the Rand will be bracing itself for the FED’s policy announcement on Wednesday.
• Last week saw the Rand take a double body blow, shocks that sent us dangerously close to breaching R17.00 to the Dollar. First came the SARB’s decision to not only leave our interest rate unchanged on Thursday despite CPI climbing to 5% a day earlier, but they also said that our monetary policy is restrictive enough to bring inflation back down to 3% over time. The market was pricing in a SARB rate hike, so with no hike materialising, the Rand got sold off aggressively, and to add insult to injury, we then heard of tankers coming under attack in the Red Sea, which saw the Dollar spike as a result.
• Worsening geopolitical headlines saw the Dollar Index register its biggest weekly gain in five weeks, but the good news is that after 14 days of continuous attacks, the US and Iran agreed over the weekend to pause their hostilities, so as to allow peace talks to resume. As you would expect, both sides are warning that their halting of attacks is conditional on the other side doing the same, and that full-blown strikes will resume the instant that the other team breaks this newfound ceasefire, but for now the market is embracing this positive development, with Brent Crude falling by 5% while the Rand is clawing back some of last week’s losses.
• Here’s hoping that the latest ceasefire holds for at least the next three days, as lower oil prices mean that inflationary concerns will ease somewhat, and that’s exactly what the Rand needs as we gear up for the FED’s policy announcement on Wednesday. Chances of an interest rate hike this week are still quite low at 36%, but it’s their language that the Rand will be concerned about, so if oil continues to fall thanks to a more favourable Middle East backdrop, that might just be enough for the FED to refrain from any overly hawkish comments.
• The following is from CNBC and talks to the Dollar’s retreat in early trade this morning: The Dollar slumped against its major peers at the start of Asian trading on Monday after the US paused its bombing campaign in Iran during the weekend, prompting a drop in oil prices and boosting global investor confidence. “Market sentiment was supported by reports that Pakistan and Iran were exploring new peace talks with the US and that oil exports from the Middle East continued to flow,” Westpac analysts wrote in a research report. “Over the weekend, the US paused strikes against Iran as tensions in the region continued to escalate.”
• No local market data today.
• Possible USD mid rate trading ranges in the Rand today are R16.60 and R16.90.

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