Daily Commentary - 23 April 2018

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

- USD / ZAR 11.2311 - EUR / ZAR 15.0113 - GBP / ZAR 17.1203 -

Economic Events:

23 April :  EC Markit Eurozone Composite PMI - US Markit US Composite PMI

24 April : GE IFO Business Climate - US Conf. Board Consumer Confidence

25 April : SA BER Business Confidence

26 April : SA PPI Data - EC ECB Main Refinancing Rate - US Durable goods orders

27 April : UK GDP - EC Consumer Confidence - US GDP, University of Michigan Sentiment

Market Commentary:

Earlier last week, the release of positive economic data spurred optimism about the future state of the South African economy which aided the rand in strengthening further. Inflation figures came in very low and the IMF also raised their growth forecast for South Africa. “Positive South African inflation figures continue to support South African bond prices and the currency,” NKC Research analysts said in a note (source: Reuters). However, the support was short-lived with the rand ending last week at a loss as the surge in US dollar demand forced a weakening trend across emerging market currencies. The rand still appears fragile and lacks the usual volatility, given the narrow trading range.

In the US market, the dollar index which tracks the greenback against a basket of six major currencies, traded up 0.1%. The recent dollar strength has been largely attributed to rising US Treasury yields. “Concerns that recent rises in global oil prices could add to inflationary pressures, as well as increases in U.S. debt issuance, are likely contributing to the rise in Treasury yields” (source: Reuters). The dollar also drew some strength from subsiding US-China trade war fears. “The dollar momentum...is probably going to carry the way at least until the next negative headline comes out,” said Stephen Innes, head of trading in Asia-Pacific for Oanda in Singapore (source: Reuters).

In the European market, the common currency is currently trading around a two-week low as investors brace for this week`s ECB policy meeting. Markets are not expecting any significant policy changes. In the UK market, the pound remains under pressure. “The pound fell last week on weaker-than-expected inflation and retail sales data and comments from Bank of England (BOE) Governor Mark Carney on Thursday, which traders interpreted as the BOE being less committed to raising rates in May due to recent “mixed” data” (source: Reuters).

In other news, trading activity on cryptocurrency exchanges has halved from its December peak, industry data shows, as retail interest in the virtual coins declines and the prices of many remain far below their recent highs. Since peaking in December and January, bitcoin’s price has more than halved, while the second and third largest cryptocurrencies, Ethereum and Ripple’s XRP have lost even more of their value. (Source: Reuters)

Our Range for the day:  R12.0500 - R12.2500