Daily Commentary - 13 December 2018
Merchant West Capital Markets
USD/ZAR 14.0854 | EUR/ZAR 16.0142 | GBP/ZAR 17.7752
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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
While most EM currencies were relatively unchanged yesterday or slightly in the green, ZAR outperformed and pushed to a low of 14.04 – strengthening more than 1.1% by the 14.14 close. We did have an uptick in November’s inflation data at 5.2% y/y (18-month highs), beating the 5.1% estimates as well as the October Retail Sales figures coming in at 2.2% y/y vs. 1.5% forecasts. Activity however was lacklustre as the locals prepare for the summer heatwaves and depart on holidays to celebrate the festive season. Further abroad – risk-on sentiment returns with positivity around U.S./China trade talks (yes, again). UK’s Prime Minister May survives a vote of no confidence and vows to push through with Brexit early next year. A close below the 14.20 mark now opens us up for more gains towards 14.00 then 13.85 mark although we would not be surprised if we move back towards 14.45/50 levels as the local currency is whippy at best.
The pound held onto most of the previous session’s gains on Thursday after British Prime Minister Theresa May survived a no-confidence vote, buying time to try to steer her unpopular Brexit deal through a deeply divided parliament. The euro trod water ahead of a closely-watched policy meeting by the European Central Bank later in the day, after edging higher on news that Italy lowered its deficit target for next year and expected the European Commission to accept its new 2019 budget proposal. The dollar index .DXY, which measures the greenback against six key rivals, was up a tad at 97.097. It had fallen from a near one-month high overnight, losing 0.4 percent, its steepest drop in two weeks.
In Britain, lawmakers from the ruling Conservatives held a secret ballot on whether they had confidence in May’s leadership of the party. Going into the vote and needing backing for her efforts to deliver Brexit, May had assured them that she would not lead the party into the next election due in 2022. She won support from 200 of 317 Conservative lawmakers, and the mutiny by more than a third signalled that she was no closer to getting parliament’s approval for her plan to leave the European Union, making it likely that sterling’s respite would prove temporary. “Just after the actual result was announced, profit-taking dominated, (but) sterling stopped appreciating,” said Masafumi Yamamoto, chief currency strategist at Mizuho Securities. “That shows it’s not bad news, but it doesn’t fix the Brexit issue. In that sense, uncertainty continues.” Sterling lost 0.1 percent on the day to $1.2614. It had bounced off a 20-month low of $1.2477 during the previous session, ending 1.1 percent higher on the day in the aftermath of the vote. (Rueters)
Our Range for today: R13.9500 - R14.2500