Daily Forex Market Report

Good morning

We are only at the start of the second day this week but already there is a very clear theme which will drive Rand price action for the next few days. We have opposing forces, each with their specific risk-on and risk-off attributes, and we can only hope that the risk-off camp wins the day.

These are the mid rates as at 8:20 today:

USD = 17.49
AUD = 11.51
GBP = 21.42
NZD = 10.74
EUR = 19.13
Brent Crude = $35.73 per barrel

Market News

  • The currency market was relatively calm yesterday as the US and UK were closed for public holidays, but we still saw the push and pull of risk sentiment on the Rand. We opened at R17.54 to the Dollar and slipped to R17.73 before pulling up our socks and strengthening back to R17.54 with further gains coming this morning.
  • The morning session yesterday was dominated by risk-off sentiment with renewed US-China tensions as the main culprit. This story is likely to simmer along for a few weeks at least, and the Dollar will benefit as a safe haven asset should the inflammatory rhetoric escalate, so while the Rand is trying to recover for various reasons that recovery could stumble on US-China headlines.
  • Fortunately fresh salvos in the US-China story were not forthcoming yesterday thanks to the US Memorial Day holiday and this allowed risk-on sentiment to steal a march on the market. US biotech company Novavax is the latest name thrown into the COVD-19 vaccine hat, this as they announced late yesterday that they are ready to start their phase 1 clinical trials with results expected in July. Those results will then determine the path for their phase 2 trail to be held in multiple countries worldwide, and as always the currency market reacted very favourably to positive vaccine news.
  • The following is from Reuters and illustrates the opposing forces within the currency market: The Dollar inched lower on Tuesday as growing optimism about a global recovery from the COVID-19 pandemic supported riskier currencies, but moves lacked the exuberance of the equities market as US-China tensions kept the mood in check. “Markets are caught between two conflicting currents,” said Michael McCarthy, CMC Markets’ chief strategist. “Rising tensions between China and the US are raising concerns, while easing COVID-19 lockdown measures are fuelling growth optimism.”
  • Locally there is a growing consensus amongst analysts that the Rand is on a strengthening trend with further gains likely over the rest of 2020. The following is from Fin24: Just weeks ago, analysts were predicting the currency would test the R20/$ mark as they anticipated large capital outflows as much as $14 billion on the back of Rand assets falling out of the World Government Bond Index. But this has not yet happened. On the contrary, appetite for SA portfolio assets has not died down, Investec chief economist Annabel Bishop noted in a Rand report. She expects the Rand to strengthen further this year, possibly to R16 against the greenback, and even further into 2021.
  • Local market data today sees our leading business cycle indicator index at 9am which is forecast to drop form 0.1% to -0.4%
  • Possible USD mid rate trading ranges in the Rand today are R17.30 and R17.70


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