Daily Commentary - 19 February 2019 | Merchant West

Daily Commentary - 19 February 2019

Merchant West Business Finance

Merchant West Capital Markets

USD/ZAR 14.1440 | EUR/ZAR 15.9859| GBP/ZAR 18.2555

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email: treasury@merchantwest.co.za

 

Market Data:

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:

 

Tomorrow's budget is being looked at as a source of inspiration where real efforts will be made to turn the fiscal ship around. Expectations have been high and rising and there is much burden on Fin Min Mboweni's shoulders. Unfairly so given that SA's fiscal woes have been a decade in the making while Mboweni has been in the private sector serving on corporate boards.  In other news relevant to the budget SAA’s CFO, Deon Fredericks announced that the financially embattled state-owned airline has entered into talks with lenders to roll over the R9.2bn worth of debt maturing at the end of next month. According to comments from the CFO, SAA is looking to restructure the R9.2bn worth of debt for 4 of 5 years. It is instructive to note that this comes after the SOE secured a R3.5bn loan last week to ensure the airline is able to operate until June. On a number of fronts, the ZAR is losing some of its shine. It was anticipated that it would do so towards the end of Feb and heading into March. Load-shedding and the perceptions of the increased risk in exposing portfolios to SA has meant that the ZAR has not managed to reach the levels it might've had these negative developments not unfolded. In the lead up to the elections and in the wake of the budget that is unlikely to yield much in the way of good news for SA, investors will be reluctant to sell USDs for ZAR to any convincing manner. It would appear that SA has missed the window of opportunity earlier this year for the ZAR to perform well and that the scales are slowly tilting away from the ZAR being able to make much more ground

Asian shares hovered near four-month highs on Tuesday as investors took heart from some progress in Sino-U.S. trade talks, while the yen slipped as the Japanese central bank said it won’t rule out further policy easing. In Asia, Japan’s Nikkei nudged up 0.2 percent after holding flat for most of the day. Australian shares climbed 0.3 percent to a 4-1/2 month peak, after gaining over 8 percent so far this year partly on expectations the central bank could ease policy to temper pressure on growth. Chinese shares skidded into the red after surging in the previous session, with the blue-chip index off 0.4 percent. That left MSCI’s broadest index of Asia-Pacific shares outside Japan down 0.1 percent, but still close to four-month highs reached last Wednesday. Trade talks dominated headlines with a new round of negotiations between the United States and China expected in Washington on Tuesday, and follow-up sessions at a higher level later in the week.

Comments from European Central Bank’s Olli Rehn on Sunday have fanned speculation the ECB would launch another round of Targeted Long-Term Refinancing Operations (TLTRO) to support bank lending. And, the Bank of Japan on Tuesday said it was ready to ramp up stimulus if sharp yen rises hurt the economy and derail the path toward achieving its inflation target. In currency markets, the euro was 0.1 percent weaker at $1.1295, not far from Friday’s three-month low of $1.1234, largely on a run of soft European economic data including Germany’s GDP figures. Most other currencies were stuck in familiar ranges. Sterling was 0.2 percent weaker at $1.2899, with an eye on Brexit talks between Britain and the European Union, while the Australian dollar held at $0.7112. The precious metals market was more lively, with palladium surging to a record high of $1,471.0 per ounce as stricter emissions standards are seen increasing demand for the auto catalyst metal. Gold held around $1,323.66 per ounce after earlier rising to a near 10-month high of $1,327.64. Oil prices were mixed, with Brent futures off 29 cents at $66.21, not far from Monday’s $66.83 which was the highest since mid-November. U.S. crude futures added 21 cents to $55.8. (Reuters)

USD/ZAR Range for the day R13,9500 – R14,2000