Daily Commentary - 16 November 2018

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

USD / ZAR 14.2040 - EUR / ZAR 16.1187 - GBP / ZAR 18.1809 -

Economic Events:

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

Market Commentary:

On a day when the land debate took a step further – investors had a slight hiccup sending ZAR to a high of 14.36 yesterday before calming down and continuing on watching the Brexit saga while we slowly crept below 14.20 and touched a low of 14.13 (closing over 1.1% stronger on the day) with a mixed U.S. Dollar as markets cut long USD positions. Expropriation Without Compensation will continue to play out in the backdrop with plenty of political and legal jousting expected going into the national election in May 2019 – this is likely to send investors on a rollacoster ride till some sort of certainty on the direction ahead is reached. We are however expecting global sentiment to continue driving the Rand in the short-term with a sustained close below 14.20 opening us up to 14.00. Near-term resistance will be found at the 14.40/50 mark. In the coming week we have the build up to the SARB’s rate decision where we are now calling for the ‘hawks’ to win with a 25bp hike in line with the FRA’s pricing in a 60% probability of the same. For now Brexit will have everyone’s attention as Britain ‘May’ or ‘May’ not leave the E.U. on current terms proposed. (BNP Paribas)

The rand jumped the most against the pound since December 2017, as the risk of a collapse of the British government and a chaotic break with the EU overshadowed local concerns about property rights. On a day that a parliamentary committee recommended a constitutional amendment to allow the expropriation of land without compensation, the rand gained as much as 2.7% against the British currency, the biggest intraday gain since December 15 2018 — three days before Cyril Ramaphosa narrowly defeated Nkosazana Dlamini-Zuma in the race to lead the ANC, paving the way for him to replace Jacob Zuma as the country’s president in February. (Businesslive)

The rand was also bolstered as interest rate increases in Indonesia and the Philippines boosted sentiment towards emerging-market assets. Local banks have previously warned that uncertainty caused by the debate on land expropriation would drive down the value of bonded properties and risk financial instability.The announcement by Ramaphosa late in July that the ANC would seek to change the constitution was blamed for a change in sentiment that wiped out the initial euphoria that had accompanied his election. (Businesslive)

Range for the day: 14.10 – 14.40