Daily Commentary - 01 August 2018

markets commentary

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

USD / ZAR 13.2928 - EUR / ZAR 15.5316 - GBP / ZAR 17.4240 -

Economic Events:

01 August: SA Manufacturing PMI - US MBA Mortgage Applications ;Manufacturing PMI; FOMC Rate decision

02 August: EC PPI Data - UK BOE Rate Decision - US Initial Jobless Claims

03 August  : SA PMI Data - EC PMI Data ;Retail Sales - US Trade Balance ;Change in Nonfarm payrolls

Market Commentary:

Sadly last night the Rand bulls took a nasty, very unexpected “knock”.   President Ramaphosa announced last night that the ANC will be looking to change the constitution after all to more explicitly allow for expropriation of land without compensation. It is not known exactly what this means, but it is believed that the ANC is seeking to more explicitly state the conditions under which expropriation without compensation will take place. (ETM)

The Rand along with so many other currencies was performing very nicely yesterday as the world watches on in regards to tonight FOMC announcement. We had performed brilliantly having strengthen to again test the key $/R 13.10 level, and in fact yesterday registered the strongest prices since early June with the Rand able to test a cent or tow under the key level a times, offering false break hopes to the local Import market.

But this was all to be neutralised with the Rand spiking by 15c in the closing trading session last night and then skiing again is Asian trade this morning to at one point test 13.38. The ANC announcement last night is believed to be politically motivated ahead of the National Elections next year and is aimed at neutering the political stance of the EFF. It flies in the face of the guidance offered by international and local organisations as well as the ratings agencies and will make it that much more difficult to build the argument for investing in SA.

As the dust settles this morning is does appear that the changes purposed aren’t necessary negative, and in many ways could be seen as logical, corrections to the Constitution, which may of course not be that easily implemented.  We have seen the Rand recovering and do again find ourselves back in the upper 13.20’s, with trading volumes returning to normal and with far less volatile being show.

The markets again seem to be shifting their attention to the two remain Policy Meeting (The FED & the BoE), but we certainly can’t completely ignore what took place last night and do still except the cages to get rattled a little throughout today & tomorrow.

Our Range for the Day:  13.15   -   13.40.