DAILY COMMENTARY - 25 APRIL 2019

Merchant West Business Finance

Merchant West Capital Markets

USD/ZAR 14.4452 | EUR/ZAR 16.1164 | GBP/ZAR 18.6432

Please feel free to contact us on the details below:

JHB: (011) 305-9500 | PTA (012) 742-8600 | CPT (021) 552-7007 

email: treasury@merchantwest.co.za

Market Data:

25 April -  SA PPI | US - Durable Good Orders | Initial Jobless Claims  

26 April - US GDP Annualised | Personal Consumption | GDP Price Index

Market Commentary:

The U.S. Dollar has now climbed to the year’s highs as global growth concerns lingers. This move sees most if not all EM currencies in the red resulting in a fifth straight day of declines for the Rand. We are some 2.8% down for the week after losing another 1.2% yesterday with 14.50 in sight as rates and bonds are on the softer side too. The next key levels to watch will be the psychological 14.50 handle while investors continue to trade with a cautious tone in light of global developments and local rhetoric. This move over the past couple of days does feel heavy and we would not rule out a consolidation towards 14.25/30 levels as the options market models signal for some ZAR strength, although we do remain vulnerable to further sell-offs in the current environment (BNP Paribas).  

The euro steadied against the dollar on Thursday after renewed worries about a growth slowdown in Germany drove it to a 22-month low overnight, while the yen showed little reaction to a Bank of Japan policy decision. The Japanese currency gave up a tad of its earlier gains against the dollar after the BOJ announced it intends to keep interest rates very low for a prolonged period, committing to do so at least through around the spring of next year. “The market reaction (to the BOJ) was barely noticeable,” said Yukio Ishizuki, senior currency strategist at Daiwa Securities. “There were already very few people who believed the Bank of Japan may be raising rates. It wasn’t really about 2020,” he said. The yen was last still up a fifth of a percent on the day, at 111.99 yen per dollar (Reuters.com).

The greenback rallied to a 23-month high of 98.189 against a basket of key rivals overnight while gaining more than half a percent, largely propelled by the euro’s weakness. The index last traded 0.15 percent lower at 98.027. “Yesterday’s strength of the dollar was exaggerated by the weakness in countries other than the U.S.,” said Masafumi Yamamoto, chief currency strategist at Mizuho Securities. The euro sat at $1.1158, having suffered its biggest one-day loss against the dollar since early March when the European Central Bank pushed back plans for its first post-crisis interest rate hike. The single currency also shed nearly 0.4 percent against the yen overnight and was last trading at 125.02 yen. The Australian dollar was largely unchanged at $0.7019. The Aussie had given up nearly 1.3 percent during the previous session after weaker-than-expected Australian inflation numbers heightened the prospect of an interest rate cut. The Canadian dollar was a tad stronger at $1.3487, edging off a four-month low hit overnight as investors raised bets on a Bank of Canada interest rate cut this year after the central bank slashed its economic growth outlook (Reuters.com).

Range for the day: 14.30 – 14.60