Daily Commentary -14 February 2018

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

- USD / ZAR 11.8872 - EUR / ZAR 14.7063 - GBP / ZAR 16.5304 -

Economic Events:

14 Feb :EU GDP Data - SA Retail Sales - US Retail Sales ; CPI data

15 Feb : US Initial Jobless ;Industrial Production ; PPI data

16 Feb : US Export /Import Prices ;Consumer Sentiment

Market Commentary:

Yesterday saw the ANC NEC officially announce that they have recalled the State President Zuma.  On the announcement, following their marathon meeting on Monday night, the Rand weakened around 10c, as the briefing did not provide too much clarity around the actual resignation of Zuma.  The trading range for the day was between R11.8750 and R11.9950, with most of the weakness coming in the afternoon post the media briefing by the ANC NEC. 

Today will be another interesting day on the political front with the Rand, as politics seem to be the major factor markets are watching at the moment.  Zuma is expected to make an announcement at 10h00 this morning and this will surely guide the Rand’s direction.

We would expect the recent ranges to hold in the short term, with strong support at the R11.8300 level, prior to any shock announcements.  There is still potential for further strength should political noise be positive, but do expect this strength to dissipate the closer to the budget we get.

On the international front, the USD came under pressure once again yesterday, losing almost 0.30% against a basket of currencies, mainly due to the fact that investors remain nervous ahead of the US CPI release at 15h00 this afternoon.

Other factors weighing on the dollar include the prospect of the US pursuing a weak dollar strategy and the greenback enjoying less interest rate advantage as EU countries part with easy monetary policy.

The greenback slid to a 15-month low against the yen to 106.840. Against the euro, the dollar fell from last week's trough of $1.2204 to $1.2363. We expect the weak dollar bias to persist to the end of the weak.  (Source: ABSA)

Our Range for the day:  R11.8200 – R12.0000