Daily Commentary - 25 June 2018

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

USD / ZAR 13.4578 - EUR / ZAR 15.6721 - GBP / ZAR 17.8243 -

Economic Events:

25 June: US New Home Sales

26 June: US Conf. Board Consumer Confidence

27 June: EC Money Supply - US MBA Mortgage Applications, Advanced Goods Trade Balance

28 June: GE CPI Data - SA PPI Data - US GDP and Jobless Claims

29 June: UK GDP - EC CPI Data - SA Trade Balance and SA Budget - US University of Michigan Sentiment

Market Commentary:

The rand has been recovering over the last week with many market participants attributing the strength to a correction from highly oversold levels. Several factors, both local and international, contributed to the rand`s recent volatility. The threat of a global trade war persists, the local power utility has implemented controlled outages and the Turkish election contributed to the emerging market sell-off. “The Turkish lira was up more than 1 percent against the dollar after President Tayyip Erdogan and his ruling AK Party claimed victory in presidential and parliamentary elections on Sunday, overcoming the biggest electoral challenge to their rule in a decade and a half” (source: Reuters). South Africa has also recorded its largest current account deficit in two years, following a sharp drop in export activity. The range of weaker-than-expected economic figures that came out over the last few weeks had cast some doubt over the path of economic recovery, and will continue to weigh on the local currency.

In the US market, the dollar continues to trade at a multi-week low as risk aversion dominates investor sentiment. This followed threats made by President Donald Trump of a 20% tariff on all car imports from the European Union, and the European Union responding with a threat of retaliation. “Investors and traders are worried that threats of higher U.S. tariffs and retaliatory measures by others could derail a rare period of synchronized global growth” .Furthermore, “the Wall Street Journal reported that U.S. President Donald Trump plans to bar many Chinese companies from investing in U.S. technology firms and block additional technology exports to China”. (source: Reuters)

In the European market, “business activity in Germany and France, the euro zone’s top two economies, picked up in June despite trade tensions between Europe and the United States, IHS Markit data showed” (source: Reuters). European Central Bank President, Mario Draghi, also announced that their quantitative easing program will draw to an end in December.

In the UK market, “the pound rose to a six-day high on Friday after a Bank of England meeting revived expectations of a rate hike this year, but fears of a breakdown in Brexit talks next week limited sterling’s gains” (source: Reuters). Companies with major operations in Britain have expressed their concern over the exit deal and the future of their British operations, which could put thousands of jobs at risk.

Our Range for the day: R13.3000 - R13.6500