Daily Commentary- 30 May 2018

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

USD / ZAR 12.5864 - EUR / ZAR 14.5840 - GBP / ZAR 16.6980 -

Economic Events:

30 May : SA Money Supply ; Budget - EC Consumer Confidence - US MBA Mortgage Applications ; GDP data

31 May : CH Manufacturing PMI - SA PPI Data ; Trade Balance - EC CPI Estimate - US Initial Jobless Claims

1 June : EC Eurozone Manufacturing PMI - SA Manufacturing PMI - US Change in Nonfarm Payrolls ;ISM Manufacturing

Market Commentary:

Yesterday started off as expected, London returned to work and jumped on the band wagon selling off the Euro and their own currency too, as did the European market, sadly we then saw a strong move out of EM currencies as well. The $/R fell within the first two trading sessions by 1.7%, from 12.44 to 12.68, before finding any traction. The €/$ followed the same pattern after having started the day back above the 1.16 level, once it reached around 1.1640 it dropped to 1.1510  .The £/$ opened at 1.3320 and by 10h30 1.3205 was being offered.

The general consensus as the markets opened yesterday was that we would see the Yankees on their return from their long weekend and selling off as well and therefore front-running what was effectively inevitable seemed like the only option, but true to form when it comes to the currency market these predictions were wrong and we in fact saw American buying into the currencies on their entry into the market.  Nothing aggrieve of course but at around 1h35 - 14h40 the $/R was able to pull back to around 12.60 and was able to hold onto these gain for the next few hours before again climbing as markets were then closing (local time) & closed eventual in N.Y. at 12.70.

We start our day seeing a strong recovery in the Italy bond market, as panic around the Italian presidential crisis seem to be dissipating a little. This in turn has seen the Euro, Sterling and EM Currencies pulling back nicely and at the time of writing we were already back at : :€/$1.1605,  £/$1.3290  &  $/R 12.5520, as there is quite a bit of  data to be released both locally and abroad  today ,we will wait with baited breathe to see what will play out ;especially around the SA Budget release.

We are expecting a positive budget as we have seen better fiscal condition at the start of the new fiscal year than many had expected.  The introduction of a 1% increase in VAT revenue as from the 1st April being the main positive factor, but growth is still a concern as well as government and infrastructure spending.

Range for the Day   :R 12.4000    -  R 12.7000