________________________________________________________________________________________
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
_________________________________________________________________________________________
Date: 26th June 2009
Please find your Daily Insight attached.
WHAT TO WATCH TODAY:
-US personal income and spending data at 14:30
TODAYS EXPECTED RANGES:
USD/ZAR: 7.95 8.12
EUR/ZAR: 11.10 11.30
HIGH INTEREST RATE DIFFERENTIAL REMAINS
Following the MPCs decision to keep rates on hold yesterday, it is clear that SA rates are bottoming out at levels that leave us with a large interest rate differential against the developed world. In fact, even if the SARB cuts another 50bp in 3Q09 as we expect, our rate differential with the US and EU would be more or less in line with the average of the past decade and at a much higher level than the low of the previous cycle (see chart). The ZAR has not (and it seems will not) be undermined by the rate cycle.
The decision to keep rates on hold was a ZAR positive and, helped by a great rally on Wall Street, USD/ZAR is back testing 8.00. There appears very little impetus for a sustained break lower, with SARB reserve accumulation still feared below the figure. While both Wall Street and EUR/USD volatility could generate some pressure, it seems that we are left to drift at around or just above the 8.00 level today.
THE CROSSES:
-EUR/ZAR also pushed down after the rate decision but looks likely to end the week trading around 11.20.
-GBP/ZAR is stabilising around 13.10.
-ZAR/JPY is trading in a very tight range just under 12.00 with no obvious direction.
OTHER NEWS
-Governor Mboweni said that if it was up to him, there would be no further rate cuts.
-Eskom was granted a 31.3% tariff increase.
-If the Xstrata bid for Anglo American is to get regulatory approval, it must benefit the country according to a government official.
-After getting board approval, which is due by the end of July, a Bharti MTN deal would reportedly need an additional four months to get regulatory approval. The US$4bn net inflows from the deal could, we suspect, start coming even before the end of the process implying around end-3Q09 at the earliest.
-The IMF is reported set to raise its global growth. The fund, nevertheless, continues to expect a moderate upturn and remains very worried about conditions in Eastern Europe. They will publish their new forecasts on 7 July.
-Moodys said there is no danger of a South African sovereign rating downgrade.
John Cairns and Nema Ramkhelawan
Financial Markets Research: Currency
Fixed Income, Currency and Commodities (FICC)
Rand Merchant Bank, a division of FirstRand Bank Limited
1 Merchant Place
Cnr Fredman Drive & Rivonia Road, Sandton, 2196
P O Box 786273, Sandton, 2146, South Africa
Tel +27 (0)11 282 8656
Rand Merchant Bank is an authorised Financial Services Provider
Talk About This