Daily Commentary- 05 March 2018 | Merchant West

Daily Commentary- 05 March 2018

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

- USD / ZAR 12.0166 - EUR / ZAR 14.7707 - GBP / ZAR 16.5610 -

Economic Events:

05 March : EC Markit Composite PMI - US Markit Composite PMI ; ISM Non-Manufacturing Composite

06 March : SA GDP - US Factory Orders - Durable Goods Orders

07 March : SA SACCI Business Confidence - EC GDP - US MBA Mortgage Application ;ADP Employment Change ;FED Reserve release Beige Book

08 March : EC ECB Main refinancing rate - US Initial Jobless Claims

09 March : US Change in Non-Farm Payrolls ; Unemployment rate

Market Commentary:

USDZAR traded as high as 12.01 on Friday afternoon as the Rand corrects on SA land issues and global factors.  The rand opened around 11.82 on Friday morning following the National Assembly’s adoption of a motion for land expropriation without compensation.  However, Isaah Mhlanga, an RMB economist explained that the Rand’s recent sell off is mainly due to global factors, particularly US Dollar strength, saying, “The mediocre performance in both the Rand and Bonds over the past few days partly reveals how the market focuses on the negative part of local developments while completely discounting the positive aspects.”  The Dollar index was again unable to sustain a weekly close above the 90.0 handle after having nearly run to 91.0 midweek.

SA Government bonds weakened alongside other EM currencies on Friday as investors turned to safe haven assets on the threat of a global trade war sparked by US President Trump’s steel tariffs plan against China.  This week sees a host of Fed speakers, and US Non-Farm Payrolls data.  Hawkish sentiment and a strong wage number could keep emerging markets on the back foot.

Domestic business conditions deteriorated further in January, albeit at a slower rate, posting 49.0 pts, from 48.4 pts in December.  The uptick in the PMI is being taken as a positive signal and we should expect a continued increase in confidence over the coming months, premised on improved economic optimism on the improving SA political backdrop.  The energy department confirmed on Friday that there will be cuts to petrol and diesel prices from this Wednesday, equating to declines of 2.5% and 3.7% respectively.  Recall that hefty price hikes last year were the main contributor to the topside seen in headline inflation then.

In Global news, RBA, ECB, and the BoJ are all due to announce their rate decisions in the coming week with the Royal Bank of Australia first up.  The consensus in the global economy is that global central banks will continue to refrain from tightening as inflationary pressures still remain a concern.

Our Range for the Day: R11.9000 - R12.1000