Daily Commentary - 08 August 2018

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

USD / ZAR 13.3197 - EUR / ZAR 15.4546 - GBP / ZAR 17.2124 -

Economic Events:

08 August: SA SACC Business Confidence - US MBA Mortgage Applications ;Fed's Barkin Speaks in Virginia

09 August: CH PPI - US Initial Jobless Claims ;PPI Final Demand

10 August  : UK Trade Balance ;GDP ;CPI

Market Commentary:

The rand opened the day slightly stronger after retracing some of its earlier losses this week, despite disappointing local economic data releases. “Data from Statistics South Africa showed manufacturing output grew marginally in June while contracting on a quarterly basis” (source: Reuters). Local manufacturing production came in at 0.7% yesterday, well below the consensus forecast of 1.7%. However, the rand did not seem to take much notice of the slew of negative headlines, but the trade developments between the US and China still remained the dominant theme surrounding emerging market currencies. The rand has since moved to a narrower trading range in the absence of any further significant releases this week. On the JSE, the Top 40 traded up 1.56% and the All Share up 1.49%.

In the US market, the dollar rally has slightly subdued with the dollar index trading lower against a basket of other major currencies.  The dollar found support over recent sessions as the prospect of higher interest rates and risk aversion drove investors towards the greenback. The escalating trade dispute between the world`s two largest economies has been a dominant factor in international markets, and responsible for dramatic swings in general risk appetite. “U.S. Trade Representative’s office said late on Tuesday that the U.S. would begin collecting 25 percent tariffs on another $16 billion in Chinese goods later this month”. “The move is the latest by U.S. President Donald Trump to put pressure on China to negotiate trade concessions after imposing tariffs on $34 billion in goods in July. China has vowed to retaliate to an equal degree” (source: Reuters). Markets will also focus on US CPI data due on Friday, with a 0.2% increase expected based on a poll by Reuters.

In the European markets, the lack of any significant news or data has kept the euro relatively stable after strengthening slightly, and is expected to continue being driven by US dollar movements. The pound is currently trading at a multi week-low as fears of a potential failure to reach a Brexit deal in time start to realise. “If Britain leaves the EU without a transition agreement, it would revert to trading under World Trade Organization rules. Most economists think that would cause serious harm to the world’s fifth-largest economy as trade with the EU, Britain’s biggest market, would become subject to tariffs” (source: Reuters)

Our range for the day : R 13.2000 - R13.4000