Daily Commentary - 24 January 2018 | Merchant West

Daily Commentary - 24 January 2018

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

- USD / ZAR 12.0334 - EUR / ZAR 14.8122 - GBP / ZAR 16.8830 -

Economic Events:

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:

As expected the Rand saw very little movement and remain comfortable within the 12.02 / 12.20 range yesterday , never climbing any lower than 12.1550 and also not finding any real traction under 12.06 / 12.07.  We had no major data out yesterday and domestic politics isn’t likely to play much part of our currency this week with Ramaphosa overseas in Switzerland at the world Economic Forum.

However after hours a slightly different story was been told, with the U.S. political debacle again weighing in heavily on the Dollar as a currency.  The US Congress’ inability to decisively deal with a government shutdown continues to translate into concerns about the impact this could have on the US economy and is dragging on for a lot longer than most investors would like. The dollar again lost further ground against almost every currency pair you can think of, getting hit hard against the Sterling and even harder yet against the Yen.

The GBP/USD yesterday pushed above the key 1.4 level and is sitting around 1.4030, a level last seen  mid-June last year, USD/JPY is now under 110 at around 109.90 a massive move and many expect for it to even look to test as low as 108 but are expected some intervention by the Bank of Japan to prevent that.

Naturally the Rand was able to perform admirable again the weakening Dollar last night , breaking under 12.06 again, testing just a cent or so  above 12. Breaking 12 was a highly likely prospect as this weaker Dollar is bring about a bit of a “risk off climate” with Markets moving more into the  safe haven / first  world currencies, with only the spill off trading finding their way into the Emerging market. Not-the-less our fragile Rand is still remaining as one of the top performers, and things are still looking up.

Nothing on the data front yesterday, but today won’t be the same ,with the main focus (locally) being on the CPI figures out at 10h00. The market is looking for around 4.8% y-o-y print for Dec. The risk is once more that the data surprises to the downside with money supply growth still in short supply could prompt a small ZAR sell-off. However the SARB decision last week to keep the Repo Rate unchanged is still helping keep off-shore investor interested and a positive CPI figure could be what it then takes to see the USD/ZAR 12.00 level breaking.

Our Range for the Day  :-    11.95    -    12.15