Daily Commentary -05 July 2017

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

- USD / ZAR 13.2917 - EUR / ZAR 15.0601 - GBP / ZAR 17.1698 -

Economic Events:

05-July: SA Standard Bank SA PMI - EC Retails Sales - US Durable Goods Orders - US FOMC Meeting Minutes

06-July: SA SACCI Business Confidence - US ADP Employment Change ;Jobless Claims;Trade Balance

07-July: US Change in Nonfarm Payrolls ; Unemployment Rate

Market Commentary:

Another interesting start of the day with the rand just like yesterday starting off getting bought with traders started off speculating into the Emerging Markets on the likelihood that Friday and Monday’s selling had run its’ course and it was time to starting going long again, but sadly that view proved to be a little premature and a little wrong, as we certainly saw as the day got going the bearish direction on the EM currencies continued and with the U.S. closed saw far more trades shorting the currencies and found the USD/ZAR climbing to a new low of 13.2770 by late afternoon.

So do we see a repeat of yesterday with the U.S. only coming in around mid-day, we have started with some front running and did dip briefly to 13.15, but like yesterday quickly surrendered these gains and have climb back into the lower 13.20’s. The key difference with today vs. the last two days is that trading volume should be up substantially and there will be far more liquidity, which should see a little less speculating. The general consensus is to see EM Currencies rebounding a bit, but one must be careful just because off-shore investors are sitting short they don’t necessarily have to push their trades into currencies and if they do one can’t guarantee it will be to the more high risk exchanges, but then again if there are chasing yield and quick returns, high risk currencies is often the chosen point of call.

The ANC policy conference closes today & Secretary General is brief the media on the conference's decisions some time later today. However, leaks from the deliberations at the policy conference suggest that on the whole the conference has not gone the way of the faction aligned to President Zuma. There has been harsh criticism of the reality of state capture, with Secretary General Mantashe having tabled an unflinching diagnosis of the issue, over opposition from Premier League provinces aligned with Zuma. The report was tabled into the official record. Another notable development was the ANC’s decision to distance itself from the term “white monopoly capital,” which the “GuptaLeaks” have shown was devised by a public relations firm to shift the narrative away from the state capture issue. The policy conference apparently also has resolved to strengthen the powers of the ANC’s integrity committee and make it a formal structure within the ANC’s constitution. Apparently, ANC branches will now consider the issue, according to eNCA’s report. (Investec).

On News 24 indicates that the debate on the controversial suggestion to adopt land expropriation without compensation was heated, but it is not clear at this stage if the conference resolved this issue, and the policy conference rejected the proposal to automatically have the loser in the presidential race become the deputy president as a means of imposing unity on the ANC.

On Business Day reports that the conference also debated alternative leadership candidates, including Baleka Mbete, the current parliamentary speaker and ANC chair, as well as Secretary General Zweli Mkhize.

A quiet day in terms of data and most likely not going to be too crazy, but still best to stay close to Market as and when those Yanks get started and when the Secretary General starts speaking, which sadly at the time of this report still hasn’t been confirmed.

Our Range for the Day :-    13.03    -   13.35