Daily Commentary - 20 June 2017
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- USD / ZAR 12.8180 - EUR / ZAR 14.3515 - GBP / ZAR 16.4168 -
19-June: No data of real importance
20-June: SA Current Account Data
21-June: SA CPI - US Existing Home Sales
22-June: US Jobless Claims and Consumer Confidence
23-June: EZ PMI - US PMI and New Home Sales
Public Protector, Busisiwe Mkhwebane, yesterday ordered Parliament to amend the Constitution to change the mandate of the Reserve Bank, as part of remedial actions following the CIEX investigation. This change would put an end to inflation targeting. She proposed that the objective of the Bank is to promote balanced and sustainable economic growth while ensuring the socio-economic wellbeing of citizens is protected. At a dinner at the Centre for Education, Reserve bank governor Lesetja Kganyago, defended the Reserve Bank’s mandate, saying that keeping inflation low and protecting the value of the currency is supportive of economic growth.
Pierre De Vos, a constitutional law expert, said that the Public Protector is not constitutionally authorised to order a democratically elected parliament to amend the constitution. There is also almost no chance that it would carry enough support within parliament for it to be a changed event. So this is likely to be a pointless statement that would accomplish every little, but could become another hot topic for debate which will further detract from SA’s status as an investment destination.
The rand reacted to these comments, breaking through the 13.00 handle for the first time since 1st June. An impression that political interference is being exerted on SARB, is clearly not something to ignore. This morning the rand opened at 12.96 to the USD. Today sees the release of 1Q17 current account deficit, which is expected to come in at 1.9% of GDP, a slightly higher than the 1.7% seen in 4Q16.
Chicago Fed President Charles Evans yesterday said Federal Reserve officials need to show a commitment to reaching their goal on inflation, which has generally been running below target since the financial crisis.
On Monday the British and EU Brexit negotiators agreed on how to organise talks on Britain’s divorce, stressing goodwill and also the huge complexity and tight deadline.
Oil markets held around seven month lows on Tuesday as investors focused on persistent signs of rising supply that are undermining attempts by OPEC and other producers to support prices. Brent settled at $46.91 a barrel.
Expected range for today: 12.80 – 13.15