Daily Commentary - 9 March 2018

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

- USD / ZAR 11.9217 - EUR / ZAR 14.6797 - GBP / ZAR 16.4575 -

Economic Events:

09 March : US Change in Non-Farm Payrolls ; Unemployment rate

Market Commentary:

USD/ZAR firmed through 11.90 and held the close this time, starting out today modestly bid in Asian trading despite better risk sentiment. Clearly offshore event risk looms large now to dictate sentiment and directionality. While ZAR sentiment and resilience indicators are still pointing constructively for the medium-term outlook, for now it still looks like the market is uncomfortable, trading outside the pre-Zuma resignation range that extends back up to R12.20/$. SA Government Bonds were better bid yesterday but yields merely retraced some of their recent increases, ticking down 1-4bpts. R2023s were the notable outperformer, but trade has remained relatively listless with narrow ranges in the midst of very little market moving events. Risk sentiment has picked up ever so slightly, but the ZAR and other EM currencies have not been the beneficiaries and markets generally trading defensively ahead of US payrolls that is scheduled to print at 3:30PM along with the US unemployment Rate for February.

The yield for US benchmark bonds rose yesterday, tracking its German counterpart as the European Central Bank dropped its easing bias. The possibility of increased supply hit US bond prices, driving the yield on the 10 year benchmark up 1.5bps to a session high of 2.892%. Payrolls figures are due to be the only market mover in today’s trade barring another Trump stunt. Non-Farms are due to reflect further expansion of 205K vs the previous 200K reading, with a surprisingly strong reading expected to go some way to boosting the case for yet more rate hikes and support the USD given the potential inflation implications. As the case for higher inflation gets built, the DXY is slowly but surely focusing in on the 91.00 threshold level once again. However dollar bulls will have a long way to go to threaten the long-standing downtrend.

Our range for today : R11.7500- R12:0500