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Below you will find a daily finance and markets review provided by Rand Merchant Bank analysist John Cairns. This information is provided as a matter of interest to readers of this blog, should you be interested to receive further information and insight you may register through RMB directly. Thanks, Ed
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Date: 25th June 2009
Please find your Daily Insight attached.
WHAT TO WATCH TODAY:
-SA PPI at 11:30
-US personal income and spending figures at 14:30
-The SARB rate decision from 15:00
TODAYS EXPECTED RANGES:
USD/ZAR: 8.03 – 8.24
EUR/ZAR: 11.10 – 11.40
PLAYING CATCH-UP TO EUR/USD
We have mixed messages from the two key themes affecting the ZAR. First, US durable goods orders yesterday was positive but housing data was weak. Second, after weakening sharply overnight on Tuesday/Wednesday, the USD rebounded strongly after the Fed failed to announce new money printing or give an explicit length of time it will keep rates on hold.
USD/ZAR is left playing catch-up to EUR/USD and after falling sharply yesterday we will probably push upwards this morning for an 8.05 – 8.18 range with greater volatility only coming in the afternoon. Local focus will be on the rate decision but ZAR movements will continue to be driven offshore, mostly by EUR/USD gyrations.
The markets are on for a 50bp cut. We arent so sure, thinking they might pause now and only cut in August (there is no July meeting). If we are right, this would be mildly ZAR positive. Either way we are at or very close to the bottom of the rate cycle and unless we get something extraordinary, the ZAR is unlikely to be much affected.
THE CROSSES:
-EUR/ZAR experienced a significant 11.11 – 11.56 range yesterday as USD/ZAR lagged EUR/USD movements. We have more of that today, with EUR/ZAR potentially pushing up from 11.20 to 11.30.
-The upward trend in GBP/ZAR was broken yesterday but should resume today with moves back to and above 13.30.
-After dipping as low as 11.40, ZAR/JPY is back at 11.80.
OTHER NEWS
-Xstrata says it will continue to engage with Anglo American on a proposed merger.
-MTN gave no further comment on the proposed Bharti deal at its AGM.
-The OECD says the SA economy will contract 2% this year and expand 2.5% next. These are also our forecasts.
-Consumer inflation fell to 8.0% in May.
-The Fed kept rates on hold, did not announce any new asset purchases and only repeated that it will keep rates at a low level for an extended period.
-The ECB lent a record 442bn in one-year loans yesterday in a bid to unlock credit markets. This effectively represents aggressive monetary easing.
John Cairns and Nema Ramkhelawan
Financial Markets Research: Currency
Fixed Income, Currency and Commodities (FICC)
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