Daily Commentary – 24 October 2018

Merchant West Business Finance

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

USD / ZAR 14.2449 - EUR / ZAR 16.2850 - GBP / ZAR 18.4483 -

Economic Events:

24 October: EC Manufacturing PMI - SA CPI and MTBPS - US Mortgage Application and Manufacturing PMI

25 October: SA PPI - US Advanced Goods Trade Balance and Initial Jobless Claims

26 October: US GDP and University of Michigan Sentiment

Market Commentary:

The rand traded weaker on Tuesday afternoon against major currencies, with global sentiment subdued due to the weight of numerous risk factors and protracted geopolitical tension, trade wars, US interest rates, Brexit, The Italian debt, Saudi Arabia’s journalist murder investigation. This played heavily on the rand. The rand was trading at 14.3675 to the dollar at 3pm. The overnight trading session saw the rand pulling back with a Wednesday morning session calm at R14.24/$ ahead of the medium-term budget policy statement scheduled for 2pm and SA CPI data at 10pm.

Tito Mboweni the newly appointed finance minister is scheduled to start presenting in parliament at 2pm with Fiscal consolidation expected to be top of the agenda. Fiscal discipline is to be as an attempt for the country to live within its means and to respect taxpayers and the best way to do so would be to find ways to promote savings, reduce the operational deficit of the budget to the point where it matches SA's growth rate and to focus spending priorities in areas that will generate an economic dividend. This economic dividend is what will assist in growing the economy more than another attempt at building a social security net which quite frankly, the tax base cannot afford. Growing the tax base must be a priority and the best way to do so is to build an environment that would encourage investment and growth. (Investec)

CPI data out at 10pm this morning which is a measure of inflation is expected at 4.8%. Inflation is measured by the annual change in CPI. Much of inflation abating to 4.8% from the prior print of 4.9% is attributed to energy minister Jeff Radebe’s capping of fuel price increases at 5c/l in September.

The risk is that the CPI data continues to surprise to the downside as the effects of weak growth, tight monetary conditions and an inability to pass margin pressures through the value chain ultimately manifest. (Businesslive)

Range for the day 14.10 – 14.45