Forex Market Report - 22 January

Good morning

We had a relatively sedate start to the week as local factors have been hard to come by and the international scene was in limbo due the US public holiday.

These are the mid rates as at 7:35 today:

USD = R13.88 AUD = R9.91

GBP = R17.88 NZD = R9.34

EUR = R15.77 Brent Crude = $61.98 per barrel

Market News

• Not a huge amount to report for the Rand as we opened the week at R13.83 to the Dollar, weakened to R13.90 but then gradually traded stronger to close at R13.82. This morning we are under a bit of pressure having slipped back to R13.88.
• In the absence of any meaningful local market data the Rand has looked to international events for direction. The only “local” influencer would be our Davos delegation that is already in Switzerland, and is talking SA up as an investment destination. Ryk ban Niekerk of MoneyWeb interviewed Jeff Radebe, Minister of Energy, from Davos yesterday and Mr Radebe was at pains to point out that Team SA (including government and business representatives) had spent many meetings together in preparation for Davos so as to ensure that they present a harmonious story building confidence in South Africa amongst the international investment community. Hopefully we get news of new investments later this week which would support the Rand.
• With the US market closed for Martin Luther King Day there was little Dollar action hence the calm in the currency market yesterday. The Dollar did manage to strengthen ever so slightly as its safe haven status saw flows into the Dollar following China’s disappointing 2018 GDP number, and the resultant concerns that the global economy is slowing down. These movements are often short lived and analysts still feel that the Dollar has peaked given the diminishing prospects of further US interest rate hikes, and the Rand could make further gains against the Dollar going forward.
• The following is from Reuters: On the whole, the Dollar is also facing indirect pressure from slackening momentum in the global economy which has forced the U.S. Federal Reserve to take a cautious approach on any further interest rate increases. Speculation is rife the FED might soon pause its tightening cycle. “We do not see the Federal Reserve raising rates this year which should lead to weakness in the Dollar. We also think the Dollar is overbought and over-valued on fundamental metrics,” said Jason Wong, senior markets strategist at BNZ markets.
• Theresa May presented her “plan B” Brexit deal to the UK parliament yesterday and as suspected it was remarkably similar to plan A which was roundly rejected last week. This is no surprise given the short timeframe she had to come up with an alternative coupled with the stubborn infighting between UK political parties on what they actually want the deal to look like. With the UK politicians unable to work together, and with the EU unlikely to agree to major concessions anyway, it looks like an extension to the Brexit deadline of 29 March is increasingly likely which means this uncertainty could rumble on for months.
• No local market data today.
• Possible USD mid rate trading ranges in the Rand today are R13.70 and R14.00.

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