Daily Commentary - 22 March 2018

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

- USD / ZAR 11.7964 - EUR / ZAR 14.5913 - GBP / ZAR 16.7026 -

Economic Events:

22 March : EC Flash PMI - SA Retail Sales  - BOE Rate Announcement  - US Initial Jobless Claims

23 March : US Durable Goods Orders

Market Commentary:

Local front:

South Africa's rand was slightly weaker early on Thursday as traders were cautious ahead of a credit rating review by international agency Moody's scheduled for Friday.At 08h20, the rand traded at 11.8375 versus the dollar, 0.2 percent lower on the day. All but two of the 18 economists polled by Reuters this week said South Africa would avoid a credit rating downgrade by Moody's, which rates the country one notch above junk. A cut to junk would see South Africa removed from Citi's influential World Government Bond Index, triggering up to 100 billion rand ($8.45 billion) in selling by foreign investors.

International front:

The dollar struggled against its peers on Thursday after the Federal Reserve indicated it was more likely to raise interest rate three times in 2018 instead of the four that some currency bulls had hoped for.The Fed raised rates by 25 basis points to 1.75 percent on Wednesday and signaled two more hikes for 2018, highlighting its growing confidence that tax cuts and government spending will boost the economy and inflation and spur more aggressive future tightening. The greenback slipped, however, with investors who had bet on the Fed signaling four rate increases in 2018 instead of the widely anticipated three seen to have taken profits after the announcement.

The dollar index against a basket of six major currencies was 0.3 percent lower at 89.528, after dropping as much as 0.7 percent overnight. “The Fed hiking rates three times, and even four times, this year won't be too big of a surprise for the currency market, which fully expects the Fed to continue normalizing policy," said Shin Kadota, senior strategist at Barclays in Tokyo."On the other hand, there is still room for the market to price in other central banks normalising policy. The dollar needs a big surprise to be jolted higher, something the Fed meeting did not provide," Kadota said. The Bank of England's meeting later on Thursday is now in focus, with market participants keeping a close eye on the central bank's policy views after robust British wage data cemented expectations that the central bank will raise rates as early as May. The pound extended its overnight rally and rose to a near seven-week high of $1.4171.

 

International data front:

U.S. home sales rebounded strongly in February, boosted by hefty gains in the South and West regions, but a chronic shortage of houses on the market remains an obstacle heading into the spring selling season. The National Association of Realtors said on Wednesday that existing home sales jumped 3.0 percent to a seasonally adjusted annual rate of 5.54 million units last month, ending two straight monthly declines. “All signs point to a spring buying season of high prices and low inventory as any new construction that is added is snapped up quickly by buyers," said Danielle Hale, chief economist for realtor.com. Economists polled by Reuters had forecast existing home sales rising 0.5 percent to a rate of 5.40 million units in February. Sales soared 6.6 percent in the South, where the bulk of sales activity occurs, and vaulted 11.4 percent in the West (Reuters)

Our range for the day :  R 11.7000 - R 11.9200