Daily Commentary - 03 August 2018

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

USD / ZAR 13.5025 - EUR / ZAR 15.6115 - GBP / ZAR 17.5272 -

Economic Events:

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

Market Commentary:

At a time of heightened geopolitical tension and policy ambiguity it is always disturbing to check the opening levels on the USD/ZAR. The potential for overnight news flow to unnerve the global currency market is particularly high. The rand market has, for the most part, taken domestic shocks in its stride, with USD/ZAR reverting to below 13.30 at the close of three of the five trading days.

Yesterday, however, was the exception, with the local unit hitting a high of 13.50 in intraday trade as the market fell prey to rising trade-war concerns which fractured global risk sentiment.

US Commerce Secretary Ross suggests US to continue to stand firm in trade spat against China, as long as this spat carries on the market will continue to that strain until two sides agree to hold talks, with the US still looking to be the aggressor. Source Investec

The benchmark R186 is perched at 8.67% after turning sharply at 8.58%, while the ALSI ended the day 1.6% lower — mimicking the general move in emerging market stocks and bonds. If early morning Asian trade is anything to go by, volatility is unlikely to abate, especially as questions over the ANC’s framework for land reform continue to flood the market.

Today is relatively dry on the data front locally, with only PMI figures out at 9:15. Globally, US jobs data due this afternoon is likely to reflect healthy growth in non-farm payrolls, reinforcing the Fed’s optimism in the strength of the US economy. Despite the BoE’s best attempts to convince audiences that the UK’s economic outlook is as bright, its hawkish rhetoric failed to enthuse the currency market, with the British pound (GBP) reeling at 2018 lows of 1.3017. This could potentially lead to a mispricing of the number of anticipated hikes. Source RMB

Our range for the day: R 13.4000 – R 13.60000