Daily Commentary - 22 November 2017 | Merchant West

Daily Commentary - 22 November 2017

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

- USD / ZAR 13.9749 - EUR / ZAR 16.4262 - GBP / ZAR 18.5158 -

Economic Events:

22-Nov : SA CPI Data - US Durable Goods Orders ; Univ Michigan Sentiment ; FOMC Meeting Minutes

23-Nov : EU PMI Data - SA SARB rate announcement - US Tax Reform Deadline

24-Nov : SA Credit rating review by Mood's and S & P Global

Market Commentary:

On the Domestic front:

South Africa's rand steadied against the dollar early yesterday, staying below the 14.00 level mark breached in the previous session, thanks to a peaceful political transition in neighbouring Zimbabwe.

At 08h27, the rand traded at 13.9725 per dollar, compared with its overnight close of 13.9700."The rand continues to trade cautiously, although it has managed to breach below the 14.0000 handle, the technical objective on the downside around 13.8500, the firmer bias being partly attributed to the changes in the political landscape by our northern neighbours," Nedbank analysts wrote in a note, referring to Zimbabwe. Robert Mugabe resigned as Zimbabwe's president on Tuesday, a week after the army and his former political allies moved to end four decades of rule. Investors are nervous ahead of S&P Global Ratings and Moody's reviews on Friday.

Statistics South Africa will publish October CPI data today at 10h00, while the South African Reserve Bank will announce its last interest rates decision for the year on Thursday.

On the International front:

The dollar treaded water against its peers on Wednesday, capped as U.S. Treasury yields failed to rise despite increasing investor risk appetite in broader financial markets. The dollar index was little changed at 93.941.The index fell back from a one-week high of 94.165 overnight after a rally triggered earlier this week by a sagging euro stalled as long-term U.S. Treasury yields continued inching lower.The greenback was a shade lower at against the Yen trading at 112.280, after slipping overnight from a high of 112.705."The dollar should be getting more of a lift against the yen in this 'risk on' environment. But what is taking precedence is the adjustment of positions before the Thanksgiving and year-end holidays by participants, resulting in the covering of yen shorts," said Yukio Ishizuki, senior currency strategist at Daiwa Securities.

The currency market showed little response to comments by Fed Chair Janet Yellen, who said late on Tuesday the central bank is "reasonably close" to its goals and should keep gradually raising U.S. interest rates to avoid the dual pitfalls of letting inflation drift below target for too long and driving unemployment down too far. Next in focus was the minutes of the Oct. 31-Nov. 1 Fed policy meeting minutes due later in the session, to be evaluated for any new indications that an interest rate hike is likely in December. The euro was steady at 1.1737 against the greenback after crawling away from a one-week low of $1.1712 brushed overnight on the political impasse in Germany.

On the International data front:

US home sales increased more than expected in October as hurricane-related disruptions eased, but a chronic shortage of houses which is pushing prices beyond the reach of some first-time buyers remains an obstacle.The National Association of Realtors said on Tuesday that existing home sales rose 2.0 percent to a seasonally adjusted annual rate of 5.48 million units last month. The NAR said sales in Houston and Jacksonville, regions which bore the brunt of Hurricanes Harvey and Irma, had rebounded. "While this summer's storms undoubtedly took some steam out of the housing market, the greater problem remains the general lack of inventory," said Mark Vitner, a senior economist at Wells Fargo Securities in Charlotte, North Carolina. "People simply are not moving as much as they used to."

Existing home sales make up about 90 percent of U.S. home sales. They fell 0.9 percent on a year-on-year basis in October and remained well below a 10-year-high 5.70 million-unit pace touched in March. Economists had forecast home sales rising 0.7 percent from September to a 5.42 million-unit rate last month. October marked two straight months of increases. There are concerns that an effort by Republicans in the U.S. Congress to overhaul the tax code could undermine the housing market.

Our range for the day  : R 13:9200 – R14:1000