Forex Market Report

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Good morning

Another week lies ahead and the Rand will need to start eking out gains against the Dollar soon or risk August going down as one of the worst performing months in a while. All eyes will be on the US / China trade talks to see if we can catch a break.

These are the mid rates as at 8:25 today:

USD = 15.24
AUD = 10.34
GBP = 18.55
NZD = 9.79
EUR = 16.91
Brent Crude = $59.32 per barrel

Market News

  • Last week was a rollercoaster for the Rand but ended up only slightly weaker than we started. Monday saw the Rand open at R15.23 to the Dollar and we bounced between R15.11 and R15.45 throughout the week, but by Friday’s close the Rand had settled at R15.30 which is a 7c loss over the week.
  • While local factors are definitely weighing on the Rand we are still at the mercy of international developments and this week could help ease those pressures if the US remains lenient. The US confirmed that telephonic talks with China are ongoing as they set the platform for face-to-face talks in September, but today the Whitehouse is scheduled to make an important announcement on Huawei. Trump has used Huawei as a tool in the trade war but today the US will decide whether or not to extend a reprieve for Huawei to be able to buy American components, with an extension seen as a positive indicator while a cancellation would be disruptive. The Rand should react to this announcement which ever way it goes.
  • The following is from CNBC: Investor optimism is likely to be capped ahead of a US decision due later on Monday on whether to continue to allow China’s Huawei to buy supplies from American companies. “Huawei is a big test to see whether the current risk-on mood will continue in the currency market,” said Takuya Kanda, general manager of the research department at Gaitame.com Research Institute. “There’s a sense of calm right now because the stimulus story is supporting the Dollar against safe-havens, but I’m not sure how long this calm will last.”
  • The Rand could also get a boost from expectations of further stimulus packages from global central banks with reports out of Germany suggesting that their government may opt to run a budget deficit to boost the Euro. The Euro jumped on this news, although it still remains at depressed levels, and the Rand usually tracks Euro movements.
  • All eyes locally this week will be on our consumer inflation print on Wednesday with forecasts calling for a slight drop form 4.5% to 4.4%. There are a few outlier predictions, most notably from Capital Economics (4.0%) and ABSA (4.2%), but on the whole a drop is expected which could open the door for further interest rate cuts by our Reserve Bank in September.
  • No local market data today.
  • Possible USD mid rate trading ranges in the Rand today are R15.05 and R15.35

 

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