DAILY MARKET UPDATE - 03 OCTOBER 2019 | Merchant West

DAILY MARKET UPDATE - 03 OCTOBER 2019

capital markets

Merchant West Capital Markets

USD/ZAR 15.1900 | EUR/ZAR 16.6230 | GBP/ZAR 18.6656

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Market Commentary:

Globally, President Trump received the go-ahead from the WTO yesterday to slap tariffs on European exports worth around $7.5bn. This is in retaliation to the government aid provided to Airbus in Europe that the WTO deemed illegal. The US will now impose a 10% tariff on European aircraft as well as a 25% tariff on a range of other goods, mostly from the agriculture sector. The tariffs will come into effect on October 18 and will likely prove to be another test for relations across the Atlantic. Any descent into another tit-for-tat trade war will no doubt hurt global economic growth further, while the upcoming tariffs will hurt US consumers, who have been driving economic growth in the country over the last few quarters.

Locally, the ANC released a statement yesterday on the outcomes of the NEC meeting held last weekend, amid an otherwise quiet local session. The market seems to have taken notice of headlines that made it into the newswires judging from price action this morning, with the rand performing best of the majors in the session, albeit from stretched levels. Bloomberg highlights that the ANC has announced that it has reached “consensus” on what needs to happen to reinvigorate the economy, including the reform of Eskom and financial reform at the municipal level. This is what the market will be sensitive to given the rating implications of inaction on Eskom’s reforms and ongoing concerns about broader corruption within the state.

USD-ZAR has backed away from the 15.40 resistance level, for now, to trade around 15.25 ahead of the local session, and seems to be moving into a technical consolidation phase. Support around the 15.18/20 level will be closely watched in this context, with a break below informing scope for a move back towards 15.05 and 14.95 after that. With the USD showing some signs of retreat, expectations are that the pair will trade heavily and at the very least test support around 15.2000 early on. If there is one concern that will keep traders cautious, it will be tomorrow's non-farm payrolls data.

Range for the day: 15.15 - 15.35