The Daily Forex Market Report

Good morning

 

Whether this is just a long overdue technical correction or the start of an actual trend change remains to be seen but after falling for six months in a row the Dollar Index looks set to register its first monthly gain of 2025, this as the Euro is about to fall for the first time this year.  The Rand is obviously hoping that this isn’t a trend change…

 

These are the mid rates at 6:05 today:

 

USD = R17.87	AUD = R11.64
GBP = R23.87	DXY = 98.80
EUR = R20.64	Brent Crude = $72.68 per barrel

 

Market News

 

• We came very close but despite the Dollar’s buoyant few days we managed to hold below the R18.00 threshold, this as we fell to R17.98 to the Dollar yesterday before reversing some of those losses.  The week’s main headlines still lie ahead of us with plenty of event risk coming today, tomorrow and Friday, hopefully we can hold position below R18.00 once all is said and done. 
• The main story of the week thus far has been the US/EU trade deal which on one hand has been welcomed with a sigh of relief given that it removes the threat of an escalating trade war between two global superpowers, but on the other hand looks to be a massive win for the US while leaving Europe in a significantly worse off position than where they were at the start of the year.  Dissent from prominent European leaders has been loud and clear, particularly from Germany and France, and with the Euro falling to its worst level against the Dollar in over a month it’s clear who the winner in this deal is. 
• Another possible source of Dollar strength could be the conclusion of trade talks between senior US and Chinese officials in Stockholm with US Treasury Secretary describing the two days as “very constructive”.  The talks were aimed at extending the 90 day trade truce between the countries which ends on the 9^th of August, and while no official extension has been announced that is because the US team now need to brief Trump before he gives the official sign off.  Comments from both camps suggest an extension is all but certain, and the prospect of contained trade tensions is Dollar positive. 
• With the Euro on the back foot as mentioned above that has seen the Dollar Index climb to its highest level in a month, the reason why we fell to R17.98 yesterday, but while trade headlines are important the market’s attention will turn to the FED and their monetary policy announcement today.  Whether they will cut interest rates tonight is not really up for debate as no action is by far the consensus call but the language around their statement will make for interesting reading, this especially as 2 FED members have publicly stated they favour a rate cut this month (but 2 votes out of 11 won’t deliver a cut). 
• The market will be glued to FED Chair Jerome Powell’s press conference to see how they are viewing threats to inflation, the economy and the labour market.  Powell has routinely said that the FED need not rush into their next interest rate cut given that Trump’s tariff policies could trigger higher inflation, something that has not materialised as yet, but on the flip side Trump’s policies have also not caused the US economy and labour market to crash as many experts felt they would and so there is no need for lower rates to save the economy.  It’s ironic that Trump’s surging US economy is giving the FED reason to stay on hold despite his calls for lower rates, and unfortunately for the Rand the longer the FED stays on hold the better it is for the Dollar. 
• What might play into the Rand’s favour is if the FED does not cut tonight, as is expected, then there’s every chance that Trump will ramp up his rhetoric against Jerome Powell and these threats have been Dollar negative of late.  But the following from CNBC suggests that even if Powell was replaced Trump might not get the lower rates he wants:  “The reason the FED isn’t cutting is not because of Jay Powell,” former Dallas Fed President Robert Kaplan said on CNBC, using the chair’s nickname. “The reason the FED isn’t cutting is there’s not a consensus around the table that it’s time to cut, and there are 12 votes and he doesn’t get to decide on his own. If there was a different FED chair right now, I think they also would not cut in July. So I think there’s more nuance here than maybe is being reflected in the public comments.”
• Local market data today sees our June budget balance but all eyes will be on the FED at 8pm, with Powells press conference at 8:30pm. 
• Possible USD mid rate trading ranges in the Rand today are R17.70 and R18.00.

 

 

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