Daily Commentary - 30 April 2018

- USD / ZAR 12.4148 - EUR / ZAR 15.0292 - GBP / ZAR 17.0565 -

Economic Events:

30 April : SA Trade Balance

02 May : EC GDP - US Federal Open Market Committee meeting

03 May : EC CPI & PPI - US Trade Balance

04 May : US Non-Farm Payrolls

Market Commentary:

Local Front:

South Africa's rand firmed early this morning as the dollar pulled back slightly from a 3½month high last week, with traders expecting thin trade in the session ahead of a national holiday on Tuesday. At 06h30 GMT, the rand ZAR traded at 12.3000 per dollar, 0.22% firmer than its close on Friday.

"Barring some local credit numbers this morning and local trade balance a bit later we don't expect too much to happen today as many locals take advantage of the extra-long weekend with the holiday tomorrow," Nedbank analysts wrote in a note. The analysts added: "The rand has room to extend lower towards 12.2000 from here but expect that area to provide some good support initially and on the topside 12.37/38 and then 12.4600."

Central bank data showed this morning that growth in private-sector credit demand in South Africa rose in March from February. The South African revenue service will publish March trade balance data at 14h00 this afternoon.

In fixed income, the yield for the benchmark government bond fell 3.5 basis points to 8.17%t, reflecting firmer bond prices.

International Front:

The dollar is still holding steady against a basket of currencies, but is under pressure by a decline in the benchmark U.S. 10-year Treasury yield. The dollar's index against a basket of six major currencies stood at 91.519 DXY, steady on the day but down from Friday's high of 91.986, its strongest level since 11th Jan.

The dollar index had risen more than 1.3% last week for its biggest weekly gain in over two months, after the U.S. 10-year Treasury yield rose above the psychologically key 3.0% threshold to four-year highs. The U.S. 10-year yield has since come off that peak and fell 3 basis points on Friday to 2.957%, down from a four-year high of 3.035% struck on Wednesday. Earlier this year, the correlation between U.S. yields and the dollar had broken down as investors focused more on trade frictions and geopolitical issues.

International Data Front:

Investors’ attention will be firmly on U.S. monetary policy next week, with a Federal Reserve meeting and the nonfarm payrolls report for April the highlights of the economic calendar. The Fed is unlikely to raise rates at the conclusion of its two-day meeting on Wednesday after a hike in March, but the central bank’s statement will be closely watched amid speculation over whether it will raise rates four times this year, rather than the three signalled by policy makers. Meanwhile, Friday’s U.S. employment report is expected to show that wage growth cooled despite a pickup in jobs growth last month.

In the euro zone, Wednesday’s flash estimate of first quarter growth and Thursday’s inflation data for April are likely to confirm that the economy has moderated since the start of the year.

Our Range for the Day :-     12.25   -   12.45