Daily Commentary - 07 March 2018

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

- USD / ZAR 11.8150 - EUR / ZAR 14.6724 - GBP / ZAR 16.4018 -

Economic Events:

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:

Stronger GDP figures helped the Rand strengthen another 15 cents yesterday after Stats SA announced that SA GDP in 2017 grew at a higher rate than predicted. The economy grew by 1.3% in 2017 compared to 2016, exceeding National Treasury’s expectation of 1% growth announced during the national budget speech in February. The largest sectoral contributor was the agricultural sector which added 0.8pps to Q4 17 GDP. This is the fourth consecutive quarter of expansion for this sector. We cautioned yesterday that the recovery in the agricultural sector was arguably largely over, especially given the growing adverse drought impact on the Western Cape. Nonetheless the GDP reading was positive for the Rand was trading at 11.84/$ at 10:30 yesterday before the GDP figures were announced. The bond market joined the Rand in some gains with the R186 gaining 8bp to trade at 8.08% and looks poised to test 8.00% technical resistance level again. In a snap note the Rand also firmed due to the ANC withdrawing their pledge to nationalise the SARB. The surprisingly high GDP figures coupled with Nene’s statement that SA had done enough to stave off a ratings downgrade by Moody’s has poised the Rand for further gains, eyeing out the 11.50 level.

The rand, is however slightly weaker this morning after a flight to less risky currencies after Trumps economic advisor, Gary Cohn resigned as Trumps advisor after an adult film star, Stormy Daniels, has sued President Trump claiming her agreement not to disclose a supposed intimate relationship with Trump is invalid, because the president never signed it, although his attorney Michael Cohen did. Gary Chon is largely credited for the pro-business tax cuts policy that drove optimism and growth last year. This hurt the Rand as fear of a potential trade war has resurfaced as This back up the argument that key global developments, especially coming from the US, may be the main drivers for all currencies this year as investors earmark risk reward prospects.

Our range for today: R11.6000 - R11.9000