Daily Commentary - 14 September 2018 | Merchant West

Daily Commentary - 14 September 2018

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

USD / ZAR 14.6849 EUR / ZAR 17.2000 GBP / ZAR 19.2758

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:

Yesterday we mentioned to the possibility for appreciation should some offshore developments further reduce the desire to speculate against emerging markets. Yesterday that came in the form of Turkey hiking rates by more than expected and indicating that it would try tackling its current account deficit through bolstering productivity and exports. The TRY responded strongly to the news.

Other notable developments included, the ECB indicating that it would continue on its course to curb monetary stimulus even though growth risks are rising. The expectation is that neither trade wars, nor Brexit will derail economic growth to such a degree that the normalisation of monetary policy would not be possible. It was only the BoE that played it cautious and left rates on hold in a show of sensitivity to the risks associated with Brexit for the UK.

Domestically, there was some good news too. Moody's indicated that their rating for SA remained stable even though the growth outlook had deteriorated. For now, it would appear as though they will be giving the Ramaphosa government the benefit of the doubt and will await clarity from the upcoming MTBPS and the budget in Feb. Moody's believes the worst to be over for the SA economy and that growth dynamics will improve, albeit gradually from current levels. It implies that any anticipated outflows from the world government bond index will not materialise any time soon.

As we head into the weekend and yesterday's move in the ZAR was powerful. At one point, it appeared to be the strongest performance since December before some profit taking on short USD positions translated into a slight bounce on the pair. Nonetheless, technical have now turned decidedly more ZAR supportive. (Source: Investec)

International

The dollar was on the defensive, enervated by the combination of improved global risk appetite and the softer than expected US CPI prints. US CPI for August decelerated to 2.7% yoy from 2.9% yoy in July, thus lowering expectation of aggressive US rate hikes this year.

The dollar index against a basket of majors closing the session 0.3% down at 95.518. The euro, the common currency, inched 0.1% against the dollar at $1.1688 as the ECB posed no surprise keeping rates unchanged.

The British Pound closed the session almost flat at $1.3105 against the dollar. Again also no surprises from the BoE as they kept their repo rate unchanged at 0.75%.

Very little in the way of data today to provide any significant directional momentum for the majors.

Our range for the day: R 14.6000 –R15.0000