Market Overview

The dollar fell against majors as well as most EMs on the back of political woes and muted January inflation numbers in the USA. News of the American President firing his secretary of state, Rex Tillerson, saw the dollar spot index slide by 0.2%, while the January USA CPI numbers did nothing to the greenback, coming in line with expectation at 0.2% m/m. In Europe, buoyed the US political noise, the euro nudged higher against the greenback to a four day high of $1.2412.                              

The rand was a touch firmer after the USD fell on news from the USA that the American president fired his secretary of state. The local unit had traded sideways awaiting the January local manufacturing data and the USA CPI numbers, which posed no surprise, coming out in line with consensus. The local manufacturing output rose 2.5% in January, a marginal improvement from the downwardly revised 1.8% y/y in December. The manufacturing numbers continue to support the narrative of an economy in recovery and position the rand for more potential strength bias. The local unit closed the session 0.36% firmer, testing a low of R11.77/$. Range for the day 11.75 to 11.95.

Both the local manufacturing and US CPI numbers offered no surprises at all, helping vols along in its move lower. In the vol market, we expect yet another quiet trading day. Possible demand will be for riskies as exporters who have been holding back for a move higher accept that current spot levels maybe sustained for a little longer. 1m atm vol opens a tad lower at 12.205 bid.

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