Daily Commentary - 22 January 2018 | Merchant West

Daily Commentary - 22 January 2018

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

- USD / ZAR 12.0548 - EUR / ZAR 4.7577 - GBP / ZAR 16.7459 -

Economic Events:

22 Jan : No data of real importance

23 Jan : EC Consumer Confidence

24 Jan : SA CPI - EC Services and Manufacturing PMI - US Services and Manufacturing PMI ; Existing Home Sales

25 Jan : SA PPI -EC ECB Main Refinancing Rate - US Advance Goods Trade Balance ; Initial Jobless Claims ; New Home Sales

26 Jan : UK GDP - US GDP ; Durable Goods Orders

Market Commentary:

Domestic political developments over the weekend have pushed the USD /ZAR lower as reports have indicated that the ANC NEC has agreed that Ramaphosa should take over The Presidency –although no time has been agreed yet. ANC’s top leadership has decided that Zuma, 75, must leave office, to win back voters and stoke investor confidence in the stagnant economy.

“It is as if Cyril is confirming that he has taken over the reins,” said Susan Booysen, a political science professor at the University of Witwatersrand’s School of Governance. “I would say Zuma will be gone in anything between 10 and 30 days maximum.”

Global leaders and influential businessmen are on their way to the World Economic Forum (WEF) annual meeting in Davos, Switzerland. The World Economic Forum is scheduled to take place between 23 and 26 January 2018 under the theme: “Creating a Shared Future in a Fractured World”. The Presidency said that the forum presents South Africa with a platform to display its attractiveness as an investment destination and trade partner, set out plans that are unfolding to secure improved and inclusive economic growth, and contribute to efforts to respond to societal challenges globally( Source : Business Tech ).

The US faces a government shutdown due to the failure of politicians to sign a new budget however we have not seen much panicked in the market as yet, but risk-off is evident and all high-risk and commodity currencies have pushes weaker, despite the initial weakness in the dollar. The focus will be on the dollar this week as other global central banks are not far from starting to hike rates.

Germany took a big step towards forming a new government when the country’s Social Democrats voted in favour of formal coalition talks that could give Angela Merkel a fourth term in office and break a four-month political deadlock( Source : Financial Times ).

There is a lot of other event risk to note this week. RMB has said to expect a local CPI inflation print of 4.8%, which will leave markets uncertain on whether the SARB will cut rates again. US GDP data is due Friday, although it could be delayed by the government shutdown and then there is the PMI data from Europe which should continue to point to robust growth.

Our range for the day : R 11.90   to    R12.15