Daily Commentary- 17 September 2018 | Merchant West

Daily Commentary- 17 September 2018

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

USD / ZAR 14.9885 - EUR / ZAR 17.4594 - GBP / ZAR 19.6193 -

Economic Events:

17 September: EC CPI Data - US Empire Manufacturing

18 September: US House Market Index

19 September: SA CPI Data - EC ECB Current Account -US Mortgage Applications ;Current Account Balance ;Housing Starts

20 September: US Initial Jobless Claims - EC Consumer Confidence - SA SARB Rate Announcement

21 September: EC Eurozone PMI Data - US PMI Data

Market Commentary:

Just as the rand started making its way back towards earlier levels, renewed pressure from the US economy has once again sent the rand over the USD/ZAR 15.00 handle. The rand has weakened rapidly over the course of a few weeks and has been trapped in a highly volatile trading space as an array of factors capped emerging market upside potential. The local currency has since experienced what now appears to have been only temporary relief as the Turkish economy raised their benchmark interest rates and Moody`s, the only agency that does not regard SA debt as junk, highlighted that a downgrade is not imminent. “Moody’s stable outlook on South Africa’s credit rating means there is little chance of a downgrade this year, the ratings agency said on Thursday, but warned that a commitment to fiscal consolidation would be key to maintaining its rating” (source: Reuters). Despite the recent upturn, South Africa has not yet weathered the storm and policy uncertainty continues to cause deterioration in business confidence from an already low base.

In the US market, the looming US-China trade dispute is again making headlines and liquidity has been lacking as investors eagerly await President Donald Trump`s next move. The dollar index, which tracks the greenback against a basket of other major currencies, traded relatively stable as market participants weigh expectations that President Donald Trump will forge ahead with new tariffs on the Chinese economy.  The trade war has been a persistent theme and has been responsible for significant swings in risk sentiment. “Investors continue to be bullish on the greenback with net long positions of $19.2 billion, according to calculations by Reuters and Commodity Futures Trading Commission (CFTC) data released on Friday (source: Reuters). Prolonged US dollar strength could add to the rand`s woes as wavering risk sentiment draws flows from emerging market economies.

In the European markets, both the euro and the pound saw improved performance as progress started to show in Brexit terms. “Apart from news over the progress of Brexit negotiations, the British currency has become increasingly correlated to risk appetite in recent weeks and concerns over a widening emerging market currency selloff has also weighed on sterling”. “Investors will watch for European inflation data later in the day and a speech by European Central Bank President Mario Draghi on Tuesday”. (source: Reuters)

Our Range for the day :R14.7500-R15.1000