Daily Commentary - 26 September 2017 | Merchant West

Daily Commentary - 26 September 2017

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

- USD / ZAR 13.3090 - EUR / ZAR 15.7221 - GBP / ZAR 17.9371 -

Economic Events:

26-Sep: US New Home Sales ;Consumer Confidence

27-Sep: US Durable Goods Orders ; Pending Home Sales

28-Sep: EC Economic Confidence -SA PPI - US GDP ;Jobless Claims

29-Sep: EC CPI - SA Trade Balance - US Univ. of Michigan Sentiment

Market Commentary:

We have seen escalating tensions between the US and North Korea generated a gyration back towards the likes of the JPY and the USD that permeated most currency markets.  Although both are implicated in the “war talk”, they both still retain their safe-haven status as does the CHF and it is clear that there was some demand for the safe haven currencies through the start of the week and Asia’s trading session this morning. 

The USD may be off its trade weighted highs, but remains a lot more resistant now, than it was post the FOMC decision, signifying that this has more to do with a turnoff to safety rather than the US Monetary policy outlook.  This “declaration of war” which N Korea classified US President Trump’s comments as being, will likely prompt some sort of a response from the US, Japan, China or the UN and should be carefully monitored through the week ahead. (Investec) Yellen’s speech today is expected to get some attention and would need to be watched however as the Fed meeting was only last week we don’t expected anything new to be said.

The rand failed in its attempt to push stronger in early September and then suffered from three weeks of underperformance before stabilising at the end of last week. This leaves the rand wearying at the weaker end of key trading ranges. Sentiment towards the rand is still fragile and the immediate threat to the rand is risk aversion.

Therefore relative rand underperformance remains an issue; it is hard to determine the exact reason for this rand underperformance, this could be due to the major import season, the general pessimism in the country, and the possibility of increased hedging to cover the December ANC National Conference. One supportive feature for SA is that in times of heightened uncertainty and risk, that the gold price tends to perform a little better and so it has proved that the gold price has rallied over the past two trading sessions in a move that will surely buttress the ZAR.(RMB)

Global event risk this week is low, focussed on eurozone and US inflation prints. The rising oil price is worth watching. OPEC’s tough stance over the weekend and the Turkish threat to cut off Kurdish supply have taken Brent to almost US$60/bbl — a two-year high. Usually higher oil prices are good for the rand because SA’s export prices rise in tandem but the current oil move is specific to that market and so is a negative because of the impact on imports.

Mario Draghi said the European Central Bank will keep as much stimulus as the euro-area economy needs when policy makers decide to adjust their 2.3 trillion-euro ($2.7 trillion) bond-buying program later this year. ( Bloomberg)

Our range for the day : R 13.2000 – R13.3600