Daily Commentary - 10 September 2018

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

USD / ZAR 15.1536 - EUR / ZAR 17.5306 - GBP / ZAR 18.6087 -

Economic Events:

10 September: UK Trade Balance ; Manufacturing & Production Data

11 September: SA Manufacturing & Production Data ; SACCI Business Confidence ;Retail Sales - US PPI Data ; U.S Fed Beige Book Release

12 September: SA Standard Bank SA PMI - EC Retail Sales - US Trade Balance

13 September:UK Bank of England Rate decision -EC Main Re-Financing Rate - US CPI Data

14 September:EC Trade Balance - UK BOE Carney Speaks in Dublin - US Retail Sales

Market Commentary:

Last week started horrifically with the Rand having fallen to a 16 month low by and retesting levels last seen December 2015 ,during “Nenegate”,(only January 2016 was worse).  Many felt we would never see these rates in 2018 and understandable so if you are to look back at how our year started, but here we have President Donald Trump,  American most hated president since Nixon making the most amazing turnaround in the U.S. economy, which sadly has had a massive ripple effect impact to all most ever other country out there, seeing the currency market pushing extensively into the Dollar and out of pretty much every other currency out there.

Friday was a good day with the Rand opening in the low 15.30s. Despite the caution prevailing in the emerging-markets complex, the local unit traded relatively steady on the day as we got closer and closer to the release of the U.S. Non-Farm figures (14h30) testing the best price of the week  -  15.0575, which was off a bit of front-running minutes before the announcement itself, but closed in N.Y. pretty much were we had started - around 15.3250.

August U.S. Non-Farm figures did come out very much in line with expectation, the average hourly earnings was expected at 0.2% and it came out slightly Dollar positive at 0.4%, their unemployment data was 0.1% back to 3.9% worse the 3.8% of July, which was the only dollar negative factor possible able to put some pressure on Fed in regards to interest hikes and the job creation figure has a consensus of 192K coming out at 201K, which is extremely flat and wasn’t going to have any pull on things.  All-in-all a rather uneventful Non-Farm release, but after the dust had settled we did see markets moving more into the Dollar than out of it and saw the Euro that got hit the hardest closing the day below the €/$ 1.1550 level.

The market without question has not moved its’ gaze one little bit. All eyes stay firmly focused on the U.S. with the attention now back on President Donald Trump with the trade tensions between the world’s two largest economies remained firmly embedded in the undercurrents. Although rising wages in the U.S. has yet to permeate into any meaningful inflationary pressures, the upward trend will likely underpin expectations for further hikes as communicated by the Fed. President Trump doubled-down on his threat against China on Friday, this time stating that he is ready to implement tariffs on all Chines imports “at short notice.” This latest bout of tariff threats has dampened China’s chances of exiting the trade debacle unscathed and we are all very nervous as to what impact this could have to the EM Currencies.

This week sees more than its’ fair share of data out locally, in Europe and the U.S.   -   With Thursday being perhaps the biggest of the lot, where we’ve got U.S. CPI Figures and in the U.K. the Bank of England Interest rate announcement.

Our Range for the Day  : R 15.0500  - R 15.3200