DAILY MARKET UPDATE - 05 FEBRUARY 2020 | Merchant West

DAILY MARKET UPDATE - 05 FEBRUARY 2020

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Merchant West Capital Markets

USD/ZAR 14.83 | EUR/ZAR 16.3597 | GBP/ZAR 19.2757

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JHB: (011) 305-9500 | PTA (012) 742-8600 | CPT (021) 552-7007 

email: treasury@merchantwest.co.za

Produced for Merchant West by ETM Analytics

Market Commentary:

Emerging market currencies were a sea of green yesterday as risk appetite recovered on the back of stimulus measures implemented by the People’s Bank of China aiming to minimise the economic impact of the coronavirus epidemic. The ZAR rode this wave of risk-on trade, appreciating 0.85% on the day to further retrace some of last week’s steep losses. Since then, however, the market has turned cautious again, as the virus’s death toll rose to more than 420, in turn driving a rotation out of higher-risk currencies such as the rand and back into safe-haven markets such as the USD, CHF, and JPY this morning.  

On the domestic news front, headlines were primarily dominated by loadshedding and Eskom’s operational problems once again. There was, however, some positive news in the form of a warrant being issued for the arrest of former president Jacob Zuma after he failed to show up for his corruption trial, signalling a more aggressive approach by authorities to tackle corruption. Recall that Zuma is facing 16 criminal charges ranging from racketeering to corruption, while his name has also come up frequently in the ongoing Zondo Commission of Inquiry into State Capture. 

Looking ahead, the Standard Bank “all economy” Purchasing Manager's Index (PMI) headlines today’s domestic data card, and should reflect South Africa’s still-gloomy economic conditions. The index has remained in contractionary territory since May last year, suggesting that operating conditions in the private sector continue to deteriorate. This should be old news by now, however, meaning a significant market response is unlikely barring any major shocks to the data. Externally, US employment change stats should provide fresh insights into the state of the US labour market and prospective inflationary pressures, and could hold some market-moving power. All that being said, the spread of the Chinese coronavirus will likely continue to hold most of the financial world’s focus, as it remains the most pressing threat to near-term global economic activity. 

Expected range for the day: 14.75 - 14.85