Daily Commentary - 30 November 2017 | Merchant West

Daily Commentary - 30 November 2017

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

- USD / ZAR 13.6563 - EUR / ZAR 16.2120 - GBP / ZAR 18.3755 -

Economic Events:

30-Nov : SA PPI and Balance of Trade - US Initial Jobless Claims

01 Dec : SA New Vehicle Sales - EC Markit Manufacturing PMI - US ISM Manufacturing PMI

Market Commentary:

Choppy trade yesterday as the Rand tried to test the 13.57 level again before selling off to a daily low of 13.75. Overnight we have seen the Rand strengthen again and is currently trading at 13.63 against the Greenback. The consensus in the market is that Rand strength has been overdone and would favour mild weakness over the next couple days with the pair potentially returning to the 13.80s or 13.90s. The Rand has remained the top performer in the high-yielding universe even in the face of our benchmark bonds still being sold off. R186s traded higher again yesterday as foreign investors continue to dump our bonds, reaching a low of 9.315% last night. The fact that Rand gains are not being supported by our bond market contributes to the idea that we should expect a pullback in our currency in order to be more aligned with the South African fixed income market and other EM currencies.

Rand specific issues such as sentiment and positioning will still dominate trade but to a lesser extent than in the early part of the week given the string of key global and local data and events. Eskom got downgraded again by Moody’s to Ba3 and placed it on review for a further downgrade due to the SOE’s weak stand-alone credit profile resulting from liquidity concerns and poor corporate governance.

The main global focus will be the OPEC meeting. Expectations are that producers are meeting to extend oil cuts for yet another nine months, to the end of 2018. US taxes will also still be in focus with the full Senate set to have a vote on the bill either today or tomorrow. The odds that a deal will be reached before year end are currently sitting at 43%. The Greenback was muted yesterday despite big moves higher in US treasury yields with the DXY to remain underpinned towards 93.00. The Federal Reserve Board is set to turn slightly more hawkish in 2018 as Yellen departs a Trump gets to fill 4 seats including Yellen’s huge influence with the general rhetoric to still hike interest rates in line with guidance at the very minimum.

Our range for the day : R13.55 - R13.70