Daily Commentary - 15 November 2018 | Merchant West

Daily Commentary - 15 November 2018

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

USD / ZAR 14.2561 - EUR / ZAR 16.1639 - GBP / ZAR 18.4772 -

Economic Events:

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 Rand benefitted from a fade in the U.S. Dollar yesterday as we grinded lower all the way to 14.28 post U.S. CPI in very thin waters and the market moving quite aggressively in light flows. This was reversed in the New York session hitting highs of 14.45 once again and eventually closing at 14.38. We are seeing more USD weakness this morning which has ZAR flirting with the 14.30 mark as investors are keenly watching for any further Brexit developments. After nine months of investigation – the review committee will present its report on Expropriation Without Compensation later today, expect some nervy investors looking for direction on the matter. We had a slowing in domestic retail sales figures to eighteen-month lows released yesterday but as expected Emerging Markets are running on news from abroad. Expect to see some whippy volatility to end the week. (BNP Paribas)

The recession looks as though it is likely over. The retail trade sector falls under the ‘trade, catering and accommodation’ category which accounts for around 13.3% of GDP, of which the retail trade sector accounts for around 6.1% of GDP. This implies that the sector therefore likely contributed positively to Q3:18 GDP. This, together with other monthly data, also supports our view that SA in Q3 exited the technical recession of H1:18. (Standard Bank). This holds the view the SA economy begun the move out of recession in the 3rd  quarter.

The China – US trade war seems to be watering down. Which could see investor more bullish to risky assets, US government sources told Reuters on Wednesday that China had sent a response to US demands for trade reform but gave no further details, raising the hope the two sides could resume negotiations to end their trade war. Issues of the Italian budget deficit continue to hover over the markets, but all eyes on are on the UK as Prime Minister Theresa May with a draft Brexit agreement to British lawmakers (Businesslive). May secured the backing of her cabinet after 5 hours negotiating, though it is understood that several ministers have voiced against the deal. Theresa May was very clear on her stand for the draft deal "This deal, which delivers on the vote of the referendum, which brings back control of our money, laws and borders, ends free movement, protects jobs, security and our Union; or leave with no deal, or no Brexit at all ". This is a very positive development and giving clarity to the Market which has been seeking direction on this matter.

Range for the day: 14.10  – 14-45