01 December 2017

Contact Merchant West Capital Markets on: (+2711) 305-9500 or treasury@merchantwest.co.za

- USD / ZAR 13.6687 - EUR / ZAR 16.3062 - GBP / ZAR 18.4843 -

Economic Events:

01 Dec : SA New Vehicle Sales - EC Markit Manufacturing PMI - US ISM Manufacturing PMI

Market Commentary:

The Rand traded in the same range yesterday as it did on Wednesday. The 13.57 support level failed to break and the Rand has since traded weaker around the 13.73 level. We’ve open today not far off where we closed last night at 13.70. The Rand rally has seemed to have lost steam and the nature of markets is that repeated failures at a key level usually see sentiment shift in the other direction, particularly given that global issues could still provide the impetus for a break later today. Foreigners continue to sell into the rally, dropping another R3bn of bonds yesterday and taking the three day total to R7bn. Local data was positive for the Rand with the trade balance of R4.5bn being the ninth surplus in a row.

PPI inflation softened marginally to 5.0% Y-o-Y in October but food price pressures are bubbling under the surface which implies food inflation at the consumer level will trough in Q1 of 2018. National Treasury released main budget data for October that does little to relieve the gloomy outlook for SA’s fiscus. The monthly deficit came in higher than expected at R34.8bn versus a forecast of R29.3bn. Total tax revenues were up 6.4% Y-o-Y in October with the Growth rate for the first seven months of the fiscal year coming in at 5.9% Y-o-Y. The National Treasury did mention that it’s working on a new framework for the Governments SOE guarantee program which will impose stricter rules and conditionality. On the political front, Ramaphosa was confirmed to have taken the lion’s share of the ANC branches in the Eastern Cape at 423 vs 61 for Dlamini-Zuma. While there have been plenty of reports about Ramaphosa picking up solid numbers, the eventual outcome should still be considered too uncertain to call.

The U.S. Senate is due to vote on the tax reform bill tonight, which could bring about a fair amount of volatility in the late afternoon trades. U.S. stocks have fluctuated while the dollar is poised to post its first weekly gain in 4 weeks. Yesterday we saw U.S. personal spending and income figures came it slightly better than expected at 0.4% while continuing jobless claims increased to 1957k.

Our Range for the Day   :-       13.57    -     13.75