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Daily Insight with John Cairns
Daily Insight
WHAT TO WATCH THIS WEEK:
-2Q09 SA GDP 11:30 on Tuesday
-April SA CPI and PPI figures 11:30 on Wednesday and Thursday
-SARB rate decision at 15:00 on Thursday
-April SA credit and money figures 08:00 on Friday
-April SA trade data 14:00 on Friday
-US consumer confidence on Tuesday
-US housing data on Wednesday and Thursday
-US durable goods orders Thursday
-The large US debt issuance
WHAT TO WATCH TODAY:
-German IFO business climate index at 10:00
-With US and UK markets closed today, there is little else scheduled that could affect
TODAY’S EXPECTED RANGES:
USD/ZAR: 8.25 - 8..45
EUR/ZAR: 11.55 - 11.75
UNDERPERFORMING AS 8.25 HOLDS
Global risk appetite continues to slip but for the currency markets the story is all about USD weakness. With EUR/USD pushing above 1.400, USD/ZAR dipped very briefly below the key 8.25 support level on Friday but proved unable to sustain and trades around 8.33 this morning.
Interestingly, after outperforming in April, the ZAR is now proving a considerable underperformer. Perhaps the rumoured large order in the market has been finished or perhaps the SARB has finally started to accumulate reserves once again? Whatever the case, 8.25 on USD/ZAR remains intact and we will need further USD weakness to get us through. With US and UK markets on holiday, there seems little risk of this today. But risks remain through the week as the USD has broken key support levels against the majors and is no longer finding support from risk taking. Key perhaps will be the interest in the US$101bn in treasury bonds being issued this week. Locally we have a string of data, which will mostly be ignored, but for the first time in months there is genuine indecision over what the SARB will do on Thursday. Most analysts think a 100bp cut; we are with the minority expecting only 50bp.
THE CROSSES:
-With currency markets mainly being driven by USD weakness or strength, the other ZAR crosses remain quite stable. EUR/ZAR looks happy trading at around 11.60. GBP/ZAR remains comfortably above 13.00 and ZAR/JPY around 11.30.
OTHER NEWS
-North Korea says it successfully conducted its second nuclear bomb test. This has caused Asian markets to weaken this morning.
-The SARB and the banking association is to set up a committee to look into the spread between the repo and prime interest rates.
John Cairns
Financial Markets Research: Currency
Fixed Income, Currency and Commodities (FICC)
Rand Merchant Bank, a division of FirstRand Bank Limited
