Daily Commentary – 20 December 2017

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

- USD / ZAR 12.7227 - EUR / ZAR 15.0547 - GBP / ZAR 17.0224 -

Economic Events:

20 Dec : US Existing Home Sales -SA ANC Conference last day

21 Dec : US GDP ;Initial Jobless Claims

22 Dec : SA South African Budget - US New Home Sales -Foreign Exchange Market closes at 12:00

Market Commentary:

Yesterday, the Rand traded in a relatively tight range compared to the past few trading sessions, possibly showing signs that the usual December “breather” has now begun.  It opened at about R12.79 and closed at about R12.77 at 17h00 SA time.  With all the big political events in South Africa out of the way now, we should see the Rand start to settle into a narrower trading range till year end.  The ANC conference is due to draw to an end today, but with all the big news regarding the CR17 win all done and dusted, the impact on the currency of the rest of the conference should be minimal, although, any big surprises may cause some short term volatility.  The major issue at the moment is related to the possible re-vote, aimed mainly at the election of the Secretary General, and if this matter is not resolved, could lead to ratings agencies raising their eyebrows again.

Foreigners seem to be happy with the outcome of the Elective Conference and this is shown in the bond market yesterday.  South Africa saw an inflow of about R2.8 billion yesterday, showing signs that they are relatively comfortable with the outcome.  Ratings agencies have provided mixed reviews on the election, with Moodys relatively happy that this may show signs of a positive policy shift, and Fitch, indicating that there may be some political uncertainty due to the fact that the results were so close and there may be a split forming within the ruling party.

In the US, the passing of US tax reform is still the major factor at the moment.  The market seems to be happy that the bill will be passed by the end of this week, and bar any surprising changes, it should not have a big effect on the USD.

On the date front, the only data of any real importance out today is US Existing Home Sales, with no major movements expected in the currency markets on the back of this.

All-in-all, we are expecting a relatively quiet day for the Rand.

Expected Range for the day: R12.6200 – R12.8000