Daily Commentary - 05 April 2018 | Merchant West

Daily Commentary - 05 April 2018

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

- USD / ZAR 11.8958 - EUR / ZAR 14.5922 - GBP / ZAR 16.7271 -

Economic Events:

05 April : SA  Standard Bank SA PMI ; SACCI Business Confidence - EC Services PMI ; PPI - US Initial Jobless Claims ; Trade Balance

06 April : US Change in Nonfarm Payrolls ; Unemployment rate

Market Commentary:

Following the South African Reserve Bank`s decision to cut domestic interest rates and a further comment by SARB Governor Lesetja Kganyago that the rand appears to be overvalued, the rand has been struggling to retrace the resulting losses. For now, the escalating tensions between the world`s two largest economies, the US and China have introduced significant uncertainty and fear into international markets and has become a theme that is likely to persist. Despite the overall risk-averse sentiment prevailing in the market, the spill-over effects on the oil price could potentially hurt the rand even further. “Concern that US President Donald Trump’s measures will trigger a trade war may hamper global growth and weaken demand for oil”, according to Nedbank technical analyst Mehul Daya (source: Moneyweb). Over the short-term, the rand will mainly be influenced by international events due to the lack of any significant local data. On the JSE, the Top40 traded down 0.27% and AllShare down 0.48%.

In the US market, the dollar index which tracks the greenback against a basket of six major currencies, remained relatively flat. The dollar has stabilised over the last trading session after “President Donald Trump’s economic adviser Larry Kudlow said the administration was in “negotiation” with China, and not engaged in a trade war” (source: Reuters). Data released yesterday showed that private payrolls increased in March which could heighten expectations for the jobs data due on Friday. Investors will be keeping a close eye on the release, as well as any comments from Jerome Powell, Chair of the US Federal Reserve.

In the European market, “euro zone inflation published on Wednesday increased in line with expectations in March, providing modest support to a European Central Bank push to wind down its stimulus programme” (source: Reuters). In the UK market, the pound continues to maintain its position of strength as investors anticipate the outcome of a potential interest rate hike. Weak British construction industry data failed to halt sterling’s four-day rally against the dollar on Wednesday, as investors focused on an expected interest rate hike in May. The IHS Markit/CIPS UK Construction Purchasing Managers’ Index (PMI) slumped to 47.0 from 51.4 in February, a bigger fall than had been predicted by any economist in a Reuters poll. (source: Reuters)

Range: 11.75 – 12.00