Daily Commentary - 14 November 2018 | Merchant West

Daily Commentary - 14 November 2018

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

USD / ZAR 14.4462 - EUR / ZAR 16.2921 - GBP / ZAR 18.7534 -

Economic Events:

14 November: GE GDP Data - EC GDP Data - SA Retail Sales - US CPI Data

15 November: EC Trade Balance - US Empire Manufacturing ;Retail Sales ;Initial Jobless Claims

16 November: EC CPI Data - US Industrial Production ; Total Net TIC Flows

Market Commentary:

The U.S. Dollar decided to take a breather but remains steady on the back of potential trade talks during a day that saw ZAR swing by 20-odd big figures moving aggressively from 14.36 to 14.55 but eventually closing relatively unchanged at the 14.46 levels. 

The Rand finally gave way to the 14.50 mark but remained range bound as we are back in the 14.40’s this morning.  There is a flurry of data releases across markets but key drivers like: Brexit, European politics, ‘Trade Wars’, will continue to drive the EM basket along with the oil prices. In other news – former minister of finance, Gigaba resigned from his most recent post as minister of home affairs, succumbing to pressure after it was established that he had lied under oath. There are now reports surfacing of a potential cabinet reshuffle although the timing has not been determined as we are six months away from an election. We are expecting limited moves for the day ahead in some choppy waters. (BNP Paribas)

Although the core view remains that the SARB keeps rates on hold at the next meeting with a weak economic climate offsetting some of the risks posed by the ZAR, the probability is shifting.  As it remains a fluid situation with a high degree of uncertainty, one would have to add that the short to medium term outlook for rates is no longer as stable as it was. However, there is no strong argument to change the rate outlook just yet. That might change if the current sell-off in EM assets extends. (Investec)

In other news, it is also interesting to see the way in which the USD has retreated. When news broke that the Brexit text had been agreed and that a deal was finally on the table, the GBP surged and those long of the USD have since liquidated some of those positions. It has assisted most currencies to make back some lost ground against the USD and the ZAR has been no exception, although the reaction has been somewhat muted. That being said, the ZAR's performance may improve through the course of the week, especially if a cabinet reshuffle is announced and the outcome is a further clean-up of cabinet. (ETM)

Range for the day : 14.3500 – 14.6500