Daily Commentary - 26 April 2018

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

- USD / ZAR 12.4143 - EUR / ZAR 15.1080 - GBP / ZAR 17.2858 -

Economic Events:

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:

It has become safe to assume that the newly elected political leadership no longer drives the direction of the rand, after the local currency lost a significant portion of its value in less than a week. Instead, the rand is now taking the majority of its cue`s from international factors, particularly the US. The recent dollar strength on the back of higher US treasury yields have been the majority contributor to the rand`s demise. This appears to be the case across all emerging market currencies and is not isolated to South Africa. Local factors have also not provided much support for the currency as SAFTU set forth on their strike which raised fears in the equities and bond markets. Markets will keep a close eye on the wage negotiations between public servants and the state as a shutdown looms. The weaker currency and higher oil prices will also reduce the SARB`s ability to ease monetary policy. On the JSE, the AllShare index traded down 1.25%.

In the US market, the dollar is maintaining its position of strength, gained from the increase in benchmark US Treasury yields. The 10-year U.S. Treasury yield set a fresh four-year high of 3.035 percent on Wednesday, driven by worries about the growing supply of government debt and inflationary pressures from rising oil prices. U.S. first-quarter gross domestic product data due on Friday could determine whether the dollar extends its gains (source: Reuters). Also, “President Donald Trump has threatened to scrap the 2015 agreement under which Iran curbed its nuclear programme in return for sanctions relief, sparking a wave of risk-off sentiment globally” (source: Moneyweb).

In the European market, the euro marginally strengthened. “The immediate focus for euro traders is the European Central Bank monetary policy decision. The ECB is widely expected to keep policy unchanged but its comments will be followed closely for any hints of when it might scale back its massive monetary stimulus”. In the UK market, the pound is slightly weaker as markets remain cautious ahead Britain`s first-quarter economic growth numbers due on Friday (source: Reuters).

Our Range for the day: R12.3000 - R12.4500