Daily Commentary - 11 January 2019

Merchant West Business Finance

Merchant West Capital Markets

USD/ZAR 13.8182 | EUR/ZAR 15.9292 | GBP/ZAR 17.6337

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email: treasury@merchantwest.co.za

Market Data: 

11 Jan GB GDP Data |  US CPI Data

Market Commentary: 

USDZAR: Rand opens relatively unchanged this morning and continues to trade range bound although in choppy waters. Mixed data and global sentiment meant that we touched highs of 13.95 yesterday but we are back at the week’s lows at 13.80 currently. We are expecting more of the same with no directional driver – we do have President Trump threatening a national emergency should he not get the money to build his wall which continues to keep the U.S. Dollar somewhat subdued.  No significant moves are expected today with a continuation of the choppy trade we have seen. The interesting question that remains is, when will the U.S. saga around the shutdown of the government start to worry markets?     

                 

The dollar fell versus its major peers on Friday, as investors grew increasingly confident that the U.S. Federal Reserve may hit the pause button on monetary tightening this year. Fed Chairman Jerome Powell reiterated on Thursday the U.S. central bank has the ability to be patient on monetary policy given that inflation remains stable. Markets are now pricing in no further rate hikes by the Fed this year. Fed Vice Chair Richard Clarida also struck a dovish tone, underscoring the central bank’s willingness to remain patient on the issue of raising rates. “The market has almost priced in that the Fed will not be hiking rates any further. To get the dollar weaker, market now has to expect a rate cut...I don’t see that happening,” said Sim Moh Siong, currency strategist at Bank of Singapore. Sentiment was still slightly cautious in Asian trade on a lack of concrete details from the United States and China on any progress in their trade dispute after a three-day meeting in Beijing. Traders still remain optimistic that a trade deal between the world’s largest economies will eventually materialize.

 

The Aussie dollar was last at $0.7201, gaining 0.2% versus the greenback, while the kiwi firmed 0.44% to $0.6808.The dollar also fell 0.47% versus the offshore yuan to 6.7602. The yuan is now at its strongest since late July last year. The dollar index fell by 0.17% to 95.37. The index has fallen around 2.2 % since mid-December on expectations that a slowdown in growth, both in the United States as well as globally, will restrict the Fed from raising rates in 2019. The safe-haven yen strengthened 0.1% to 108.25 per dollar, reflecting investors' cautious wait-and-see mode. The euro gained 0.2% to $1.1519, after losing 0.4% of its value in the previous session. The single currency has been pressured by a slew of weaker-than-expected economic data, especially from France and Germany. Elsewhere, sterling traded marginally firmer, fetching $1.2752 in early Asian trade with traders focused on the progress of Brexit.

Data obtained from Reuters

 

Our range for the day – R13.7000 – R14.0000