Daily Commentary - 30 July 2018 | Merchant West

Daily Commentary - 30 July 2018

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

USD / ZAR 13.1731 - EUR / ZAR 15.3706 - GBP / ZAR 17.3007 -

Economic Events:

30 July: EC Economic Confidence - GE CPI Data - SA Budget - US Pending Home Sales

31 July : CE CPI Estimate -EC GDP Data - SA Unemployment ;Trade Balance

01 August: SA Manufacturing PMI - US MBA Mortgage Applications ;Manufacturing PMI; FOMC Rate decision

02 August: EC PPI Data - UK BOE Rate Decision - US Initial Jobless Claims

03 August  : SA PMI Data - EC PMI Data ;Retail Sales - US Trade Balance ;Change in Nonfarm payrolls

Market Commentary:

The ZAR opened below the 50-day moving average once again at the 13.18 levels this morning – outperforming most of the emerging market peer for the month of July. Positive sentiment for the most of last week as a result of Chinese investment into the country and into SOE’s as well an agreement between the U.S. and EU to suspend new trade tariffs spurred some risk appetite with the Rand appreciating close to 2 %.( Source: BNP)

In terms of data, this week will see the release of more second quarter SA-centric figures, which should give us a better sense of the growth momentum after the disappointing start to the year. Money supply and credit extension figures should set the tone for the week, with the data expected to show a marginal improvement in credit demand. That might be the case but a trip to the petrol station is a stark reminder that consumption spending remains largely constrained by rising overhead costs. June’s trade balance (out on Tuesday) will be less newsworthy, while the mid-week release of manufacturing PMI figures for July is a crucial indicator of third-quarter sectoral activity.

The data calendar is just as busy on the global front but the number to watch at the very end of the week will be the US non-farm payrolls, which tends to rock currency markets if it differs wildly from consensus.

And though there is much to look forward to this week on the data front, the outcomes of the Fed and BoE’s policy meetings on Wednesday and Thursday should prove uneventful. Markets have priced in the possibility of a 25bp increase in both the US and the UK, though the probability of a BoE hike is slightly less assured since slivers of recent data and Brexit-related news have been uninspiring.  (Source: RMB)

Largely, the combination of data and events is likely to be more ZAR supportive than not. The money supply data will reflect ongoing tightness in the underlying monetary growth which is associated with support for the currency .The trade data is expected to reflect how the trade surplus environment has not yet ended whilst the budget data may well reveal some of the strong tax collections courtesy of the full effects of the tax increase that have been filtered through.

Technically, the bias at the moment is open to further moderations although some support at 13.1000 may prove stubborn, a break below that level could cause the ZAR to test lower levels.(Source : Investec )

Our range for the day: R 13.1000- R13.2500