Daily Commentary - 29 January 2019

Merchant West Business Finance

Merchant West Capital Markets

USD/ZAR 13.6743 | EUR/ZAR 15.6387 | GBP/ZAR 17.9814

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

email: treasury@merchantwest.co.za

 

Market Data:

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

Market Commentary: 

USDZAR: In what was largely a non-participation session yesterday, month end action was flat and rolling activity low – some risk-off returned to the market with investors somewhat defensive. The Rand pushed to a high of 13.72 yesterday afternoon but we are back in the mid 13.60/70 range this morning. All the attention will be on the world’s two heavyweights as a passive aggressive approach seems to have taken course. Expect to see some of this intensify as we look for some direction on the back of soft corporate earnings with the main theme to blame a slowdown in global growth due to the ‘Trade Wars’. This emphasises the USD as the key driver for EM assets. The rand is heading for its biggest January gain against the dollar since Bloomberg started compiling the data in 1999. The rand has now gained 5% against the dollar in January, trailing only Russia’s ruble among emerging-market peers.

 

Asian shares stumbled on Tuesday and the dollar hovered near two-week lows as prospects for a long-awaited Sino-U.S. trade deal were dealt another blow after the United States levelled sweeping criminal charges against China’s telecom giant Huawei. Despite the late uptick in share prices, the mood was still gloomy after the U.S. Justice Department unsealed indictments against China’s top telecom equipment maker, Huawei Technologies Co Ltd, accusing it of bank and wire fraud to evade Iran sanctions and conspiring to steal trade secrets from T-Mobile US Inc. The jolt threatens to undermine prospects for a trade deal between the economic giants as markets nervously await a round of trade talks with Chinese Vice-Premier Liu He, set to meet U.S. officials on Wednesday and Thursday.

 

Further complicating matters, China triggered the legal process on Monday for the World Trade Organization to hear Beijing’s challenge to U.S. tariffs, and berated the United States for blocking the appointment of judges who could rule on it. Souring U.S.-China relations roiled global markets for much of last year, and have kept investors on the back foot this month. The trade war’s broadening impact on world growth is one reason the U.S. Federal Reserve has signalled it will be patient on policy after raising rates four times in 2018.

 

Slowdown fears slugged the U.S. dollar, which faltered to its lowest in two weeks on Monday. The dollar index, which measures the greenback against a basket of major currencies, was last at 95.733. Against the safe haven Japanese yen, the dollar was down at 109.32, on track for a third straight session of losses. The downbeat global growth impulse mean investors will look for further confirmation the Fed will pause its rate-hike cycle at a two-day policy meeting ending Wednesday. Elsewhere, sterling dithered against the dollar ahead of voting in Britain’s parliament on Tuesday that aims to break the Brexit deadlock. It was last at $1.3152. Oil bounced after hefty overnight losses. U.S. crude was last up 35 cents at $52.34 a barrel while Brent gained 37 cents to $60.30. U.S. gold futures hovered near seven-month highs at $1,302.2 per ounce. Spot gold was last at 1,304.19 after breaking above a key psychological barrier of $1,300 an ounce on Friday.Data sourced from Reuters.

Range for the day – R 13.50 – R13.80