Daily Commentary - 06 July 2017

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

- USD / ZAR 13.4300 - EUR / ZAR 15.2375 - GBP / ZAR 17.3654 -

Economic Events:

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 bad day all round for EM currencies thanks to weaker price action in the commodities space with the Rand actually turning out as the worst performer due to added pressures off the political headlines from the ANC policy conference. We again started the day looking a little better off testing 13.15, but like Tuesday couldn’t hold on and quickly moved back into the 13.20’s. As the morning pushed on we continued climbing slower hoovering around the key 13.30 / 13.32 level and as the U.S. entering the market got pushed aggressive through and ran instantly to then test the next key technical level of 13.46 (the 200MDA) before finding any traction and returning to around 13.37/13.38.

Important to note that we can’t put the blame on the U.S traders for the rand crashing to 13.46 this sadly happened more so off the headlines which got announced from the ANC Conference, which sparked new concerns around the SARB’s future independence and definitely brought about a little bit of panic.

Furthermore the market reaction to the Fed Minutes was a little muted but in general did see further selling of EM currencies as the Fed is expected to maintain a more hawkish stance on their monetary policy going forward. The final low on the Rand was around 16h10 as New York had a further stab towards getting to 13.5000 and we saw 13.4925 getting paid, before comments from the SARB itself helped calm matters down and the rand drifted back to close the day around 13.3775.

The rest of the FX world still pretty much range bound ahead of Fridays’ Non-Farm Payrolls with EUR in a 1.1320-1.1370 range and GBP 1.2890-1.2950.

I think it’s fair to say that the summation of the ANC Policy Conference has shown cracks in the confidence of the Zuma camp. Attempts to change the ANC constitution to shoehorn the second placed leadership candidate into the Deputy President position were firmly rebutted by the floor, and other left-leaning sensationalist headlines about land grab and the SARB's independence, smack more of a regime on the ropes. Either way, December is more crucial than this policy conference, and expect the jostling to continue until then.

Eyes now of course shift to Fridays’ NFP and there is also the release of the ECB minutes today.

Our Range for the Day  :-   13.32   -    13.50