Daily Commentary - 05 February 2019

Merchant West Business Finance

Merchant West Capital Markets

USD/ZAR 13.4239 | EUR/ZAR 15.3455 | GBP/ZAR 17.5082

Please feel free to contact us on the details below:

JHB: (011) 305-9500 | PTA (012) 742-8600 | CPT (021) 552-7007 

email: treasury@merchantwest.co.za

 

Market Data:

05 Feb - SA Standard Bank SA PMI | EC Markit Eurozone Services PMI ; Retail Sales | US Markit US  Services PMI ; ISM Non-Manufacturing Index

06 Feb - SA SACCI Business Confidence | US MBA Mortgage Applications ; Trade Balance 

07 Feb - UK BOE Rate decision | US Initial Jobless Claims ;Trade Balance 

08 Feb - GE Trade Balance ;Current Account 

Market Commentary:

 

Local front - South Africa's rand eased on Monday as a strong dollar and U.S. Treasury yields holding recent gains put pressure on emerging market currencies, while stocks also edged lower. At 17h50, the rand was 0.53 percent weaker at 13.4000 per dollar, after closing at 13.3300 in New York on Friday. The rand has had a stellar start to 2019, gaining nearly 7 percent against the greenback, aided mainly by a global push for emerging market assets that was accelerated by last week's dovish message from the Federal Reserve. With a dearth of top-tier data this week and most of Asian markets closed for the Lunar New Year this week, the rand is expected to trade within recent ranges between 13.40 and 13.20.

South African focused investors are waiting for President Cyril Ramaphosa's state of the nation address on Thursday, where he is expected to give an update on plans to grow the economy and deal with cash-strapped state companies. “Given that it is an election year, he would be constrained to introduce new sweeping measures without knowing if he will have the requisite power to carry them out after the elections," RMB analyst Mpho Tsebe said in a note. The speech is likely to focus on job creation and highlight the government's key achievements over the past year," she added.

International currency front - The dollar held on to recent gains against its major peers on Tuesday, supported by a recovery in investors' risk appetite, which gave an overnight boost to U.S. yields.The Australian dollar rose, reversing earlier losses, after the Reserve Bank of Australia (RBA) held rates at record lows at its first meeting of the year but sounded less dovish than expected. The dollar index, which measures the greenback against a basket of six key rivals, was barely changed at 95.846 after gaining for three straight sessions. “The overly pessimistic view on developed economies and the overly dovish view on the (Federal Reserve) is being unwound," said Masafumi Yamamoto, chief currency strategist at Mizuho Securities. Trading was likely to remain subdued in Asia with many markets across the region closed for Lunar New Year holidays for much of the week. The index rose 0.7 percent after dipping last week below its 200-day moving average for the first time since early January 2018.The euro was flat at 1.1438 against the greenback, off three-week high of 1.15145 set on Thursday.

International data front - New orders for U.S.-made goods unexpectedly fell in November amid sharp declines in demand for machinery and electrical equipment, government data showed on Monday, suggesting a slowdown in manufacturing as 2018 ended. Factory goods orders fell 0.6 percent, the Commerce Department said, after an unrevised 2.1 percent drop in October. Economists polled by Reuters had forecast factory orders rising 0.2 percent in November. The release of the report was delayed by a recently ended five-week partial shutdown of the federal government. A survey from the Institute for Supply Management published last Friday suggested manufacturing activity picked up at the start of the year, driven by a sharp rebound in orders in January. But some manufacturers continued to complain that tariffs on steel imports were pushing up prices of raw materials (Reuters)

Range for the day: 13.2500 - 13.5000