Daily Commentary - 10 December 2018

Merchant West Financial Services Company

 

Merchant West Capital Markets

USD/ZAR 14.1100 | EUR/ZAR 16.1376 | GBP/ZAR 17.9583

Please feel free to contact us on the details below:

JHB: (011) 305-9500 | PTA (012) 742-8600 | CPT (021) 552-7007 

email: treasury@merchantwest.co.za

Market Data: 

10 Dec:No Data of real importance

11 Dec :SA Manufacturing Production| US PPI Data 

12 Dec :SA Retail Sales ; CPI Data | US MBA Mortgage Applications; CPI Data 

13 Dec : SA PPI Data | US Initial Jobless Claims 

14 Dec : US Industrial Production ; Markit Manufacturing PMI 

Market Commentary: 

The Rand depreciated to a high of R14.2100/$ before closing at R14.1800/$, staging its worst weekly performance since early October, as a poor current account report midweek overshadowed the bounce to R13.9225/$ which came on the back of a poor US jobs print. Looking ahead, Rand participants will have to look offshore for direction given the lack of data on the local front today. Despite the sharp move higher in USDZAR spot in the previous session, with the local unit testing a high of R14.2100/$, the implied vol term structure drifted lower. We start the day with 1-month atm vol at 17.150/18.230%. South African Government Bonds (SAGBs) firmed in tandem with earlier ZAR strength as the softer than expected US Nonfarm payroll print spurred appetite for risky assets. The 10-year benchmark bond yield dropped 3.8bps, closing at 9.023%. Range for the day R13.9800-14.2450/$.

 

The dollar slid almost half a percent against the euro and the yen on Monday after soft U.S. payrolls data fuelled speculation that the Federal Reserve may stop raising interest rates after a highly likely move next week. The Chinese yuan dipped after weak trade and inflation data over the weekend, while the British pound hit an 11-week low against the euro as Prime Minister Theresa May’s deal to exit the European Union looks set to be rejected by parliament on Tuesday. “We have rising tensions between the United States and China over Huawei and the Brexit vote in the UK parliament. The risk-off mood is likely to prevail for now,” said Kyosuke Suzuki, director of forex at Societe Generale. The dollar fell 0.4 percent against the yen to 112.30, edging near Thursday’s 5 1/2-week low of 112.23.

 

U.S. non-farm payrolls increased by 155,000 jobs last month, below economists’ median forecast of 200,000 jobs and the wage increase was softer than expected even though its annual rise remained near the highest level in almost a decade. Some Fed policymakers have struck a cautious tone about the economic outlook, possibly flagging a turning point in its monetary policy. Federal Reserve Governor Lael Brainard said on Friday the economic picture was broadly positive but that risks were growing overseas and in the corporate debt markets at home. Although U.S. President Donald Trump and Chinese President Xi Jinping struck a 90-day truce on tariffs earlier this month, U.S. Trade Representative Robert Lighthizer said on Sunday there is a “hard deadline”, noting U.S.-China trade negotiations need to reach a successful end by March 1. New tensions between the two countries flared last week after Meng Wanzhou, chief financial officer of China’s tech giant Huawei Technologies was arrested in Vancouver at the request of the United States. As the dollar wilted, the euro edged up 0.5 percent to $1.1435, even as “yellow vest” anti-government protesters wreaked havoc in Paris during the weekend. French President Emmanuel Macron will address the country at 20h00 Paris time (19h00 GMT) on Monday as he seeks to placate the protesters. ( Information obtained from www.reuters.com)

 

Our Range for the day:  R13.9500 - R14.2500