Daily Commentary - 16 August 2017

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

- USD / ZAR 13.2834 - EUR / ZAR 15.5611 - GBP / ZAR 17.0807 -

Economic Events:

16-August: SA Retail Sales - US Housing Starts

17-August: EU CPI Data - US Jobless Claims ; Industrial Production

18-August: No data of real importance

Market Commentary:

The Rand started things off yesterday a cent under 13.30, but that was sadly more or less the high of the day. We yoyo’d throughout  the morning sessions between 13.2850 and 13.3450, but moved substantially higher off the release of the US Retail sales at 14h30, climbing back into the lower 13.40’s to test 13.4150 and then recovered just as quickly to eventually close in N.Y. around 13.3250.

The US Retail sales surprised to the upside yesterday printing at 0.6% vs. a forecast of 0.4%.  Recent soft broad spending trends, retracing consumer surveys and poor earnings momentum suggested a weaker print.  While the increase is minimal, the June number was revised up from -0.2 % to +0.3%.  While these numbers certainly do not suggest that the USD economy is overheating, the market reaction would suggest the expectation of US interest rate hikes have increased.  The dollar is trading stronger and the December probability of a rate hike has increased from 35% to 45%. (S.C.B., Jhb).

Commodities were also placed on the back foot off the stronger than expect US Retail sales with both oil and gold losing some ground. Brent closed around $51.1 and is set to dip again back below $50/bbl., which is in stark contrast to the OPEC which indicated exports cuts are to be expected from next month.  Gold dip as well as the safe haven sell-off persisted and closed yesterday around 1273.26, but with the geopolitical tension seeming to have eased, we should see it remaining range-bound at these sort of levels.

Yesterday also saw data out of the U.K.   -  It was their CPI and PPI data with both missing the mark. The Sterling after opening at 1.2965, was closed the day yesterday trading around 1.2860, with the Euro was also unable to hold onto gains that it had made over the last few sessions.  Euro opened at 1.1770, and touched a low of 1.1688, before closing the day at 1.1725.

Today promises to be a rather big day when it comes to data  :-

10h30 UK July Jobless Claims

11h00 EC GDP SA (y/y) 2Q

13h00 US MBA Mortgage Applications

13h00 SA June Retail Sales

14h30 US July Housing Starts

And then the “BIG ONE”   at 20h00 is the release of US FOMC July Meeting Minutes.

Our Range for the Day  :-   13.20   -   13.35