DAILY COMMENTARY - 15 MAY 2019

Merchant West Financial Services Company

Merchant West Capital Markets

USD/ZAR 14.2693 | EUR/ZAR 15.9900 | GBP/ZAR 18.4169

Please feel free to contact us on the details below:

JHB: (011) 305-9500 | PTA (012) 742-8600 | CPT (021) 552-7007 

email: treasury@merchantwest.co.za

Market Data:

15 May - Tur Budget Balance | EU - Gross Domestic Product | US - Retail Sales | US - Industrial Production 

16 May - EU Trade Balance | EU - Eurogroup Meeting | US - Building Permits Change 

17 May - EU Consumer Price Index | US - Michigan Consumer Sentiment Index

Market Commentary:

A range bound ZAR managed to squeeze out some gains of around 0.4% yesterday after a another slight shift in trade rhetoric briefly dipping below 14.20 but has returned to the mid 14.25 levels this morning as the USD is poised to tick higher. Markets remain on edge and on the lookout for fresh directional impetus. There is a hint of volatility that will drive sentiment going into the G-20 Summit due to take place later next month with some expected back and forth between the U.S. and China till leaders Jinping and Trump eventually meet. On the data front – we had a depressed Unemployment figure up at the 27.6% level released yesterday and later today we have Retail Sales which is unlikely to improve sentiment. Expect to see much of the same in a mixed day ahead with limited rallies and two-way risk (BNP Paribas).                        

Asian stocks rebounded from a 3-1/2-month low on Wednesday as a slight softening in rhetoric from U.S. President Donald Trump eased worries about the U.S.-China tariff war, and on expectations that Beijing could unveil more economic stimulus. In Europe, the pan-region Euro Stoxx 50 futures rose 0.24% in early trade, Germany’s DAX futures gained 0.25% and FTSE futures were up 0.3%. Shares in Asia were led by strong gains in Chinese equities, which rebounded after two days of losses. “Chinese stocks are mounting a rebound as they had been oversold in recent sessions. Sentiment is also better as President Trump seems to be desiring a compromise,” said Kota Hirayama, senior emerging markets economist at SMBC Nikko Securities in Tokyo. MSCI’s broadest index of Asia-Pacific shares outside Japan gained 0.6%. The index had fallen to its lowest level since the end of January the previous day as the Sino-U.S. trade conflict intensified. Beijing on Monday imposed a tariff hike on U.S. goods following Washington’s decision last week to hike its levies on Chinese imports (Reuters.com).

The Chinese yuan was a shade firmer at 6.9028 per dollar in offshore trade, having edged away from a five-month trough of 6.9200 set on Tuesday. The dollar was steady at 109.650 yen, having pulled away from a three-month low of 109.020 plumbed on Monday when trade war worries boosted investor demand for the safe-haven Japanese currency. The euro was unchanged at $1.1207. The common currency had dipped nearly 0.2% the previous day after Italy’s deputy prime minister said the country is ready to break European Union budget rules on debt levels if necessary to spur employment. The dollar index against a basket of six major currencies was nearly flat at 97.524 after gaining 0.2% the previous day. The Australian dollar brushed a 4-1/2-month low of $0.6922 after Wednesday’s data showed domestic wage growth stalling in the first quarter, adding to the case for an interest rate cut. The underwhelming Chinese economic indicators also weighed on the Aussie, which is seen as a proxy of China-related trades. In commodities, U.S. crude futures were down 0.76% at $61.31 per barrel after the American Petroleum Institute (API) reported a bigger-than-expected build in crude oil inventory (Reuters.com).

Range for the day: USDZAR: 14.15 – 14.35