DAILY MARKET UPDATE - 10 JULY 2019

capital markets

Merchant West Capital Markets

USD/ZAR 14.1993 | EUR/ZAR 15.9300 | GBP/ZAR 17.6942

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:

08 July - US: Consumer Credit

09 July - US: NFIB Small Business Optimism | JOLTS Job Openings

10 July - UK: GDP | Industrial Production y/y | Manufacturing Production y/y| Trade Balance | US: MBA Mortgage Applications | FOMC Meeting Minutes | Fed's Bullard To Speak

11 July - SA: Mining Production | Gold & Platinum Production | US: CPI (y/y) | Initial Jobless Claims | Monthly Budget Statement

12 July - EC: Industrial Production WDA (y/y) | US: PPI Final Demand (y/y)

Market Commentary:

The rand has been fairly stable since the start of the week with minimal deviation from its newly established range as market participants look for clues on the future of U.S. monetary policy. “Trading was largely muted ahead of U.S. Federal Reserve Chairman Jerome Powell’s testimony to the Congress and release of minutes on Wednesday from the U.S. central bank’s last policy meeting” (source: Reuters). “It has never been easy to predict where the rand is headed but now it feels an even riskier forecast to make. Last week the SA currency managed to break below R14 to the dollar briefly in the wake of the G20 meetings in Japan but soon found its way back up to a level it has tended to return to over the last year or so – around R14.20 to the dollar. The currency has been caught between international and local changes in confidence and market sentiment, shifting in response to the developments that are tending to hold sway at the time. Last week it experienced the tailwinds of favourable global events, whereas in June it felt the pain of surprisingly poor local growth data, breaking above R15 to the dollar” (source: Daily Maverick).

In the U.S. market, “The dollar neared a three-week high against a basket of major currencies on Wednesday as investors continued to unwind bets on deep U.S. interest rate cuts, pushing Treasury yields higher” (source: Reuters). Previously held expectations of multiple interest rate cuts are fading, following the release of stronger economic data towards the end of last week. However, if inflation does not accelerate, a further cut could still be justified.  “The dollar could continue to creep higher if Powell’s comments on the U.S. economy are perceived as neutral or even slightly hawkish, which would support the argument that additional rate cuts will be limited”. (source: Reuters)

In the European market, “Renewed strength in the dollar would be an extra worry for the British pound, which is stuck near a six-month low due to uncertainty over how Britain will avoid a messy no-deal exit from the European Union. The British pound fell towards its lowest levels in more than two years on Tuesday against the backdrop of a worsening economic outlook and rising fears about a no-deal Brexit under a new Prime Minister”. (source: Reuters) “The British pound declined 0.5% to $1.2457, the weakest in more than two years. The euro dipped 0.1% to $1.1202, the weakest in three weeks” (source: Bloomberg).

Range of the day: 14.15 - 14.40