Daily Commentary - 18 February 2019

Merchant West Business Finance

Merchant West Capital Markets

USD/ZAR 14.0855 | EUR/ZAR 15.9205| GBP/ZAR 18.1736

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:

18 Feb - EC No Data of real importance

19 Feb - EC ZEW economic sentiment survey

20 Feb - GE PPI data | SA CPI Data | EC Current Account data | US Retail sales ; MBA Mortgage Applications ;FOMC Minutes | EC Consumer Confidence | SA Budget Speech 

21 Feb - EC German CPI; Markit PMI | US Initial Jobless Claims ;Markit PMI

22 Feb - EC CPI Data | US Industrial Production ;Total Net TIC Flows

Market Commentary:

 

USDZAR: Investors experienced a retreat in EM currencies last week – the most this year. The Rand lost over 3% by the close of the week even after a modest 0.35% gain posted on Friday. We currently trade 14.05 this morning with the main event to look forward to this week is the much debated annual budget speech which will be delivered by the Minister of Finance on Wednesday – the main theme remains around structural reforms and the sustainability of Eskom. Speaking of which, there is no scheduled load shedding for the beginning of the week at least. Expect a slight ease in liquidity for the evening trade with the U.S. out on a public holiday today with a flat yet steady Dollar. Taking risks into account (foreign and domestic) ZAR seems more comfortable above this 14.00 handle. There seems to be a slight risk-on feel to the week with “very productive” discussions on a potential trade agreement as stated by President Trump. Unless we get any horrid surprises in Wednesday’s budget speech – we expect ZAR to continue in this 14.00 – 14.50 range in the near-term at least.      

 

Asian share markets bounced broadly on Monday as investors dared to hope for both progress at Sino-U.S. trade talks in Washington this week and more policy stimulus from major central banks. MSCI’s broadest index of Asia-Pacific shares outside Japan rose 0.9 percent, largely recovering from a sharp fall last Friday. Japan’s Nikkei climbed 1.8 percent to its highest level of the year so far, while Shanghai blue chips rallied 2.1 percent The Dow and the Nasdaq had boasted their eighth consecutive weekly gains on wagers the United States and China would hammer out an agreement resolving their protracted trade war. There are also growing expectations of more reflationary policies from some of the world’s more powerful central banks. The need for stimulus was highlighted on Monday by data showing a sharp slide in Singapore exports and a big drop in foreign orders for Japanese machinery goods. Beijing is already taking action with China’s banks making the most new loans on record in January in an attempt to jumpstart sluggish investment. Minutes of the Federal Reserve’s last policy meeting are due on Wednesday and should provide more guidance on the likelihood or not for rate hikes this year. There is also talk the bank will keep a much larger balance sheet than previously planned.

 

The risk of an easy ECB saw the euro touch a three-month low on Friday before then bouncing on dovish comments from Fed officials. The single currency edged up 0.2 percent on Monday to $1.1312, though that was still well within the $1.1213/1.1570 trading range that has held since mid-October. The dollar was steady on the yen at 110.53, having backed away from a two-month top of 111.12. Sterling was a shade firmer at $1.2913 ahead of Brexit talks between British Prime Minister Theresa May and European Commission President Jean-Claude Juncker this week. All of which left the dollar down at 96.765 on a basket of currencies and away from last week’s top of 97.368. In commodity markets, the drift in the dollar helped spot gold firm 0.2 percent to $1,323.56 per ounce. Oil prices reached their highest for the year so far, buoyed by OPEC-led supply cuts and U.S. sanctions on Iran and Venezuela. U.S. crude was last up 25 cents at $55.84 a barrel, while Brent crude futures rose 5 cents to $66,30.

Range for the day – 13.9500 – 14.2500