Daily Commentary - 30 January 2019
Merchant West Capital Markets
USD/ZAR 13.6168 | EUR/ZAR 15.5616 | GBP/ZAR 17.8108
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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
The narrative around SA has improved slightly, load-shedding appears to be contained for now, revelations of state capture continue to be ventilated and some real progress is being made by the authorities to consider alternative strategies to dealing with the dysfunctional SOEs, Eskom being the most critical. Technically speaking, the USD-ZAR remains vulnerable to another downside leg and a meaningful break lower could well see some more capitulation from newly established long positions. A break below 13.5400 would leave the pair vulnerable to an extension of the move, but it appears that a catalyst of sorts might be needed. The most likely scenario is that it comes from the market interpretation of the FOMC.
Investors were relieved that there was no fresh bad news after the company shocked financial markets at the start of this month when it’s rare revenue warning sparked fears the U.S.-China trade tensions were taking a toll on the tech sector. CEO Tim Cook, who is in regular contact with U.S. President Donald Trump, also said trade tension between the United States and China is easing in January. That helped boost optimism around current high-level trade talks between the two countries, even though many investors remain sceptical about whether the economic giants can bridge differences over a number of issues. Investors are also looking to the outcome of the Federal Reserve’s rates review later in the day, with expectations policymakers will reinforce their recent dovish stance given signs of a slowdown in the U.S. economy. U.S. interest rate futures are pricing in virtually no change in official rates this year. Investors are looking for hints from Chairman Jerome Powell on whether he has any inclination to slow the drawdown of the Fed’s balance sheet by up to $50 billion a month.
Sterling smarted from the previous day’s sharp fall as British lawmakers rejected most amendments that sought to avoid Britain leaving the European Union without a deal, reviving worries of a chaotic withdrawal from the European Union. British lawmakers on Tuesday instructed Prime Minister Theresa May to reopen a Brexit treaty with the European Union to replace a controversial Irish border arrangement - and promptly received a flat rejection from Brussels. “The possibilities of no Brexit and of an extension of the Article 50 deadline have fallen. Markets may be under-estimating the chances that we could have a hard Brexit,” said Takafumi Yamawaki, head of Japan FX and rates research at JPMorgan Securities. The pound, which fell 0.67 percent on Tuesday, was last up 0.2 percent at $1.3095, off three-month highs of $1.3218 touched on Friday. Other major currencies were little moved. The euro changed hands at $1.1438, having risen to a two-week high of $1.14505 on Tuesday. The dollar was steady against the yen at 109.37 yen. The Australian dollar gained 0.5 percent to $0.7192 after a reading on domestic inflation proved not to be as weak as bears had bet.Data sourced from reuters
Range for the day: R13.4500 - R13.7500