DAILY MARKET UPDATE - 13 FEBRUARY 2020 | Merchant West


treasury outsourcing

Merchant West Capital Markets

USD/ZAR 14.868 | EUR/ZAR 16.1503 | GBP/ZAR 19.2534

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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:

The ZAR closed 0.20% weaker at 14.8495/$ yesterday after some volatile intraday trade saw it touch 14.7330/$ at one stage. After initially riding a wave of positive sentiment amid hopes that the spread of the coronavirus would soon slow down, the local unit’s fortunes changed after some dismal domestic retail sales data reminded investors of South Africa’s current economic struggles.

The currency’s mild decline has since then also been exacerbated by a turn in market sentiment after China’s Hubei province, where the coronavirus originated, reported 242 new deaths and confirmed 14,840 new cases. This doubling of the death count and sevenfold rise in new cases came as officials adopted a new methodology for counting infections, and raised concerns over China’s reporting of the virus while also pouring cold water on any optimism that the worst of the epidemic may have passed. 
The South African retail sales growth data for December that were released yesterday disappointed with a -0.4% y/y contraction, which was significantly weaker than the 2.0% y/y advance expected by the market. This also marked the steepest contraction since December 2018, highlighting the low levels of consumer confidence and ever-tightening household budgets that the sector is facing. More weak data are expected today in the form of December mining production numbers, although, barring any major shocks, the market is expected to remain on the sidelines ahead of this evening’s State of the Nation Address (SONA).  

President Cyril Ramaphosa will have the opportunity to address all three arms of the South African state, as well as the nation at large, at SONA tonight. There are hopes that the president will announce an action plan to resolve Eskom’s debt problem, although this appears unlikely given that discussions over potential strategies to deal with the ailing state utility’s R450-billion debt pile remain ongoing. Some indication of the state of these discussions and the objectives thereof are, however, expected to be provided by President Ramaphosa.

Expected range for the day: 14.77 - 14.97