Daily Commentary - 23 January 2019
Merchant West Capital Markets
USD/ZAR 13.9254 | EUR/ZAR 15.8262 | GBP/ZAR 18.0509
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23 Jan SA CPI Data | US MBA Mortage Applications | EC Consumer Confidence
24 Jan SA BER Consumer Confidence | EC Markit Eurozone Manufacturing PMI | US Initial Jobless Claims ;Markit US Manufactruring PMI
25 Jan GE German IFO Business Climate
No new meaningful developments on ‘Trade Talks’ between the Chinese and their U.S. counterparts keeps the Dollar at steady two-week high levels and sinks EM currencies broadly with the Rand taking a 1% dip towards the 14.00 stopping just shy at 13.97 by the close of the day yesterday. We have the local CPI print at 10:00 (SA-time) this morning with consensus at 4.5%; bang at the midpoint of the SARB’s inflation targeting and slightly above our call of 4.4%. Conviction and flows remain low with another mixed day in store it seems as the market continues to be hit by global growth concern headlines – this time by the IMF. We are now watching to see if ZAR will drop further and close above the 14.05/10 mark which opens us up to 14.25/30 mark. Three-month implied volatility is down some 14% this year and trending towards August 2018 levels helping ZAR stay relatively stable(BNP Paribas).
Asian stocks took a breather on Wednesday, with mounting signs of slowing global growth and concerns over a yet-unresolved China-US trade dispute putting the brakes on investor appetite for risk assets. Following a sharp drop in December, US shares gained through much of January, supported in part by expectations for a thaw in US-China trade tensions and a more dovish-sounding Federal Reserve. That also prompted global investors to plough into riskier assets (Businesslive.co.za).
The latest weak indicators came after the IMF trimmed its global growth forecasts for 2019 and 2020 on Monday, in its second downgrade in three months, just after China reported its 2018 growth slipped to the worst level in nearly three decades. US bond prices rebounded, with the benchmark 10-year yield slipping to 2.741% from Friday’s peak of 2.799%, the highest since December 27, with money market futures pricing out any chance of a Fed rate hike this year. The euro weakened against the dollar under the weight of recent weakness in the eurozone economy and worries about fallout from Brexit. The common currency traded at $1.1365, having hit a three-week low of $1.1336 on Tuesday (Businesslive.co.za).
Focus this week is now expected to shift to the World Economic Forum annual meeting in Davos, where numerous policy makers are gathering to discuss geopolitical tension and the trade war amongst other world economic issues.
Range for the day: 13.8000 – 14.1000