Daily Commentary - 05 October 2018 | Merchant West

Daily Commentary - 05 October 2018

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

USD / ZAR 14.8054 - EUR / ZAR 17.0182 - GBP / ZAR 19.2871 -

Economic Events:

05 October:SA Net Reserves - US Trade Balance, Nonfarm Payrolls

Market Commentary:

Focus has been on the jobs summit with statements from the President on creation of 275k jobs a year. No clear indication has been given as to how this will be achieved, the fiscal funding required to achieve the target and if these jobs we be through public, private sectors or a combination of the two. Further statements from the President have given government’s commitment to hold off public sector retrenchments while also pressurising the private sector to do the same.

Oil prices fell Thursday from a four year high on news that Saudi-Arabia and Russia struck a private deal in September to increase output. This is on the back of oil markets heated anticipation of the US sanctions which come into effect on 4 November 2018, analyst expect 1.5million barrels/day to be knocked out of global  supply.

This afternoon sees the much anticipated US Job data. A strong average hourly print will be seen as inflationary further supporting a hawkish Fed hikes, with an expected yoy print of 2.8% from previous 2.9%. A soft reading could prove a respite for emerging markets which are taking another knock from overnight trading with the ZAR reaching 14.93. A possible break through the resistance level of 15.00 could see the USDZAR reach 15.35-15.50.

The global backdrop remains challenging (‘Trade Wars’, U.S. Treasuries, Italy) coupled with onshore woes will keep ZAR on its toes as the Nigerian Central Bank tackles MTN and the World Bank slashes South African growth to 1%. Dollar longs have extended and the EM squeeze continues. ( BNP Paribas)

Range for the day: 14.6000 – 15.0000