DAILY MARKET UPDATE - 05 SEPTEMBER 2019 | Merchant West

DAILY MARKET UPDATE - 05 SEPTEMBER 2019

capital markets

Merchant West Capital Markets

USD/ZAR 14.7525 | EUR/ZAR 16.2656 | GBP/ZAR 18.0566

Please feel free to contact us on the details below:

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

email: treasury@merchantwest.co.za

Market Data:

02 Sep - GE: Markit/BME Germany Manufacturing PMI | UK: Markit PMI Manufacturing SA | SA: ABSA Manufacturing PMI | SA: NAAMSA Vehicle Sales (y/y)

03 Sep - EC: PPI (y/y) | SA: GDP Annualized (q/q) | US: Markit US Manufacturing PMI | US: ISM Manufacturing

04 Sep-  SA: Standard Bank South Africa PMI | EC: Markit Eurozone Services PMI | Retail Sales (y/y) | US: Trade Balance | Fed's Williams Speaks in New York

05 Sep - SA: Current Account as % of GDP | Current Account Balance | US: Nonfarm Productivity | Initial Jobless Claims | Continuing Claims | Markit US Services PMI

06 Sep - SA: Gross Reserves | Net Reserves | EC: GDP SA (y/y) | US: Change in Nonfarm Payrolls | Change in Private Payrolls

Market Commentary:

Domestically, there was an upside surprise to the Standard Bank economy-wide PMI to support sentiment, following on from the better-than-expected GDP print on Tuesday. SARB Governor Kganyago also said that the 0.6% expected growth rate forecast by the SARB is still looking likely and that inflation risks in South Africa are contained at present.

However, we should reiterate that South Africa is certainly not out of the woods by any measure, with fiscal fragility high amid dwindling tax intake. In the absence of clear structural reform by the government, risks remain that any deteriorations in risk appetite offshore could roil domestic markets – particularly in context of still very high levels of foreign ownership of South African government bonds in particular.

Note that the current account data set to be released today is also expected to show that softer growth is keeping import demand contained. Lower import demand assists in keeping the rand a little more resilient due to lower external dollar financing requirements.

ZAR View: In response to the softer dollar, the USD-ZAR has broken below crucial psychological support at R15.00/dollar with strong selling pressure coming into the market after that to reach lows intraday around 14.75 While downside pressure seems to be continuing ahead of the local open, it should be noted that stochastics point to a highly overbought rand with the move yesterday suggesting that investors were very long dollars at that stage. Further support could be seen in the 14.60/6500 region, which marks the 50% retrace of the 13.85-15.50 move (ETM Analytics).

Range for the day: 14.60 - 14.90