Daily Commentary - 18 December 2017

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

- USD / ZAR 13.6951 - EUR / ZAR 16.2408 - GBP / ZAR 18.4018 -

Economic Events:

18 Dec : SA Results of ANC Conference

19 Dec : US Housing Starts

20 Dec : US Existing Home Sales -SA ANC Conference last day

21 Dec : US GDP ;Initial Jobless Claims

22 Dec : SA South African Budget - US New Home Sales -Foreign Exchange Market closes at 12:00

Market Commentary:

What week we’ve just had, what a Friday afternoon and what a weekend  !!    The local S.A. exports has been hit and hit hard as the Rand has performed brilliantly out performing all other currencies yet again on Friday.

On Friday morning in the early hours of Asian trade 13.51/13.52 was being paid and as we walked in at 8:00am/8:30am we were still getting prices around 13.48, but throughout the day the Rand continued to firm with the more aggressive movements taking place in the late afternoon and by 17h00 as local markets closed was already all the way down to 12.23/12.24.

But there was still more to come, with the Rand at some point in the late, late hours in N.Y. as liquidity thinned, dipping into the mid. 12.70’s before immediately correcting back to close around 13.06.

We are all this morning waiting with baited breath for the outcome on the ANC’s elective conference.  The results are anticipated to be released towards mid-morning, but as yet there is no official time that the results will be released.  Thankfully, the wait for this decision is almost over one way or another and by lunch will be trading on the outcome, which will govern the general behaviour of the ZAR for possible the balance of 2017. As it stands Cyril Ramaphosa is still the firm favourite, with Dlamini Zuma to take 2nd.

The Global Market is still a little cagey in that they are fully aware that the ANC top 6 is made up of individuals implicated in state capture, and this still leaves many offshore investors sitting uncomfortably and if with Ramaphosa at the helm, we may have to wait well into the new year to see if there will be any noticeable self-correction, and as we await the final results on the voting that start this morning just after midnight we’re expecting to see plenty of volatility.  For Zuma to ultimately be recalled, will depend on whether Ramaphosa has secured enough support within the NEC and that that will be a function of whether his election campaign influenced a lot more than just the votes for himself as party president.  If he is successful in securing broad-based support across the NEC, it is likely that the markets will trade very positively on the news.

To call a range for the day is quite obviously a little illogical and hence will certainly refrain from doing that. But there are those that feel a Ramaphosa win has at this point been largely factored in already and although further Rand strength is likely it might not test much under 12.90/12.80.