Daily Commentary - 13 September 2018 | Merchant West

Daily Commentary - 13 September 2018

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

USD / ZAR 14.8476 EUR / ZAR 17.2516 GBP / ZAR 19.3618

Economic Events:

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:

Finally breaking through the  key level of 15.00 $/R in the morning session.  $/R trading 14.90 -14.8750 this morning.  A break through 14.87 could see further strengthening of the Rand to possibly 14.70. However today is a big data day which could be market moving.  Any upsets/missed expectation eg. Turkish central bank not aggressively hiking interest rates could see the Rand adversely affected and possibly moving back to 15.15 -15.25 levels.  The Turkish Central Bank policy meeting will likely get a lot of market attention.  Market participants expect the Turkish monetary authorities to hike interest rates to lift the lira, which has depreciated by 40% against the US dollar this year.  A move in line with market expectations will bode well for other EM currencies, including the rand, which have been caught in the EM contagion sell-off (RMB).

Locally we are expecting mining production and gold production data, followed in the afternoon with BoE and ECB interest rate decisions respectively and focus then turning to US CPI data.  The ECB and BoE are expected to keep rates unchanged.  South Africa mining production data will help shed more light on 3Q18 growth momentum especially with positive retail sales data being contrasted by confidence indicators with fell to 90.5 pts from 94.7 in July.  Subdued demand and rising price pressures continues to weigh down on business confidence.  Mining production is expected to have increased in July by 3.0% yoy from June’s 2.8% yoy.

EM currencies were lifted in yesterday’s trading session by softer US PPI inflation data as the USD weakened.  EM currencies are likely to benefit from an improvement in sentiment following reports that the US and China will engage in a fresh round of talks to resolve their ongoing trade dispute (RMB).

Possible Range : 14.7000 – 15.1500