Daily Commentary - 17 January 2019

Merchant West Business Finance

Merchant West Capital Markets

USD/ZAR 13.7433 | EUR/ZAR 15.6368 | GBP/ZAR 17.6791

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:

17 Jan EC CPI Data | US Housing Starts ; Initial Jobless Claims | SA SARB Intrest rate announcement 

18 Jan EC ECB Current Account | US Industrial Production ; University of Michigan Sentiment

Market Commentary: 

Domestic front - South Africa's rand and local stocks strengthened on Wednesday as retail sales rose more than expected, helping ease concerns over dismal mining data a day earlier.  At 18h00, the rand traded at 13.7200 per dollar, 0.2 percent stronger than its previous close and continuing a strong start to 2019.  Retail sales rose 3.1 percent year on year in November, versus expectations for a rise of 2.5 percent. figures point to some improvement on the demand side of the economy off a low base in the final quarter of this year," Nedbank economists said in a research note. "But the recovery in the production side remains slow and patchy."

Mining production fell 5.6 percent year on year in November. the Johannesburg Stock Exchange (JSE), stocks rose as retailers .JGERE outperformed.

Grocery retailer Pick n Pay rose 1.87 percent to 75.59 rand, while clothing firm Truworths gained 1.61 percent to 89.08 rand and apparel and homeware retailer Mr Price increased 1.62 percent to 259.14 rand.  Some retailers struggled to lift earnings and sales last year, as elevated household debts, higher fuel prices and an increase in value-added tax squeezed consumer income.  But Wednesday's data showed Black Friday sales gave a boost to retailers in November.  The JSE's Top-40 index ended up 0.6 percent at 47,665 points, while the All-share index rose 0.5 percent to 53,786 points.

International front - The dollar took a breather on Thursday following its recent strong gains against key rivals, while sterling steadied after British Prime Minister Theresa May's government won a no-confidence vote in parliament.  The dollar index, which measures the greenback against six major peers, was a shade higher at 96.133 after gaining about 1 percent over the previous five sessions.

On Jan. 10, the dollar almost fell below its 200-day moving average as the index touched a three-month low of 95.029. But then it bounced up, and stayed above that average.  The U.S. currency held onto its gains against the euro as persistent worries about the euro zone economy weighed on the single currency.  Data this week showed Germany barely avoided slipping into recession in 2018's second half, and European Central Bank chief Mario Draghi warned on Tuesday that economic developments in the euro zone have been weaker than expected.  The dollar was trading basically flat against the euro at $1.1388 after rising five straight sessions against the single currency, during which it gained about 1.5 percent.

Also in focus were concerns the U.S. government shutdown was starting to take a toll on its economy, while investors awaited more cues from the Federal Reserve after a growing number of its officials expressed caution about further rate hikes. "There's a lot of speculation that we've seen the end to the rate-hike cycle and many people are even talking about rate cuts this year," said Bart Wakabayashi, Tokyo branch manager at State Street Bank.  "The immediate is going to be the messaging from the Fed plus of course their action," he said. "If we're assuming that the market is still long dollars, any sort of change in that is going to have a pretty lasting effect."

The U.S. central bank's Federal Open Markets Committee will hold the next policy-setting meeting on Jan. 29-30 (Reuters)

Our Range for today: R13.6000 - R13.9000