Daily Commentary - 10 August 2018 | Merchant West

Daily Commentary - 10 August 2018

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

USD / ZAR 13.9552 - EUR / ZAR 15.9833 - GBP / ZAR 17.8382 -

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:

Since the start of the month, the rand has been trending weaker against other major currencies on the back of failures to reach key economic figures and an announcement by President Cyril Ramaphosa that the ruling ANC party will seek to amend the constitution in favour of land expropriation without compensation. The land reform debate has since raised concerns over economic growth, sustainable agriculture and food security, and has brought the future of South African property rights into question. Given the significant uncertainty this has created in the domestic market, the local currency has been struggling to gain support. The rand continued to lose traction on Wednesday, and weakened even further on Thursday as market participants closed positions ahead of the Woman`s Day celebrations, and a general reluctance to be long rands over weekends and public holidays, given the low liquidity environment. On the JSE, the Top 40 traded up 0.07% and the All Share up 0.14%.

In the US market, speculators still remain long US dollars on a net basis, speaking to the bullish sentiment on the greenback`s future. The dollar is trading at its highest level in more than a year against other major currencies as the trade dispute between the US and China develops. “The dollar index, which measures the greenback’s strength against a group of six major currencies, was up 0.05 percent at 95.550 after gaining 0.5 percent overnight. A rise above 95.652 would take the index to its highest since July 14, 2017” (source: Reuters). The threat of a global trade war became prevalent when US President Donald Trump initially imposed tariffs on China, and later extended it to the European Union. More recently, President Trump also engaged with Japan. “U.S. President Donald Trump is pushing Tokyo to sign a free-trade agreement and has threatened to impose higher tariffs on auto imports including those from Japan” (source: Reuters).

In the European market, the pound remains fragile as the probability of securing a Brexit deal in time diminishes, while the euro has relatively stabilised. “The euro slumped with emerging-market currencies and stocks declined amid concern Turkey’s problems are spilling over. The Turkish lira hit a fresh record low amid a souring of diplomatic relations with the U.S. (source: Bloomberg). “The single currency had retreated 0.7 percent overnight, its decline accelerating after the European Central Bank said that risks to global growth are increasing as the risk of protectionism and the threat of higher U.S. tariffs sap confidence” (source: Reuters).

Our range for the day : R13.6000 - R 14.1000