Daily Commentary - 28 January 2019
Merchant West Capital Markets
USD/ZAR 13.6201 | EUR/ZAR 15.5411 | GBP/ZAR 17.9510
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28 Jan - No data of real importance
29 Jan - No data of real importance
30 Jan - US MBA Mortage Applications| SA Budget | US GDP Data ; FOMC Rate Decision
31 Jan - SA PPI Data | EC GDP Data | SA Trade Balance | US Initial Jobless Claims
1 Feb - EC Markit Eurozone Manufacturing PMI | SA Absa Manufacturing PMI ;Naamsa Vehicle Sales ( y/y) | US Change in Nonfarm Payrolls ; ISM Manufacturing ;University of Michigan Current Conditions
Sentiment globally seems to keep favouring Emerging Markets as Developed Markets continue on a dovish rhetoric – ZAR appreciated a further 0.7% on Friday, dipping to the lows of the year at 13.59 on Friday and again this morning with the U.S. Dollar giving way. We are over 6% in the green for the year-to-date, beating all peers to the top spot in terms of spot returns. In what is billed as a busy week ahead, it will be interesting to see how markets react to events including the FOMC, U.S./China trade talks, earnings as well as a flurry of data on the back of a temporary reopening of the U.S. Government. We should see some choppy trade and delayed moves as investors will have a lot to digest as most are positioning to closing the books for the month trying to look through the noise.
Facing mounting pressure, U.S. President Donald Trump agreed on Friday to temporarily end a 35-day-old partial U.S. government shutdown without getting the $5.7 billion he had demanded from Congress for a border wall. In response Wall Street rallied broadly on Friday as investors were relieved to see an end to the longest U.S. government shutdown in history. The shutdown had left the markets anxious as it came at a time of heightened worries over slowing global growth, signs of stress in corporate earnings and a still unresolved Sino-U.S. trade war. “As things stand this morning, we have only 18 days left before we get another government shutdown, or a Wall. That should keep things interesting for markets,” wrote strategists at Rabobank. Attention now shifts to Chinese Vice Premier Liu He’s visit the United States on Jan. 30-31 for the next round of trade negotiations with Washington. The high-level talks in Washington will include discussions about China’s currency practices, U.S. Treasury Secretary Steven Mnuchin said. He has criticized the yuan’s weakness in the past, but in recent days, positive sentiment toward the talks has lifted the yuan’s value against the dollar.
In the currency market, the pound hovered not far off a three-month high of $1.3218 set on Friday on the back of optimism that Britain can avoid a no-deal Brexit. Britain is set to leave the European Union on March 29, but the country’s members of parliament remain far from agreeing a divorce deal and longer term prospects for sterling remained far from clear. The immediate focus was on Tuesday, when the British parliament will debate and vote on Prime Minister Theresa May’s Brexit “plan B”.
The euro was also on the front foot against the sagging dollar, which was on the defensive as the Federal Reserve convenes its first policy meeting of 2019 where it is expected to leave interest rates unchanged after raising them five times in as many quarters in December. The attention will be on the policy outlook as the Fed has signalled a slower pace of rate increases this year with markets speculating it might pause its tightening cycle soon. The single currency was a shade higher at $1.1410 after gaining 0.9 percent on Friday, paring the losses from earlier last week on dovish-sounding comments by European Central Bank President Mario Draghi.
Against the Japanese yen, the greenback slipped 0.2 percent to 109.31 yen, extending mild losses at the end of last week. The yield on benchmark 10-year Treasury notes edged down to 2.740 percent compared with its U.S. close of 2.751 percent on Friday. (*Data obtained from www.reuters.com)
Our Range for today: R13.5000 - R13.7500