Thursday 16 January 2014

ZAR and other EM currencies battling against upbeat USD

Trade report 16/01/2014

ZAR outlook

USD/ZAR expected range: 10.8200 – 10.9800


Pressure on the ZAR remained yesterday and this morning the local currency dropped to a new 5-year low of R10.95/USD, nearly 0.7% down from its close in New York on Wednesday evening.  The strnger than expected US Empire manufacturing data has reinforced taper expectations at the FOMC next week.

Local news

SA data released yesterday was a mixed bag as Kagiso PMI for December disappointed by dropping below the neutral 50.0 mark for the first time since April 2013, but Nov retail sales data was a surprise to the topside as it showed growth of 4.2% y/y from a prior 1.4%.  The question now is whether this is sustainable given the rising costs of food and fuel and general poor credit health in households.

International news

The general feeling in the markets is that the Fed will continue with its QE taper at the FOMC meeting scheduled for next week, given the positive US data recently released, indicative of an economy that is growing steadily.  Investors will be keenly awaiting comments from voting Fed member Bernanke for confirmation of this.

TODAYS KEY DATA POINTS (GMT):

•    07:00    DE    CPI y/y (final)
•    10:00    EZ    CPI y/y (final)
•    13:30    US    CPI y/y
•    14:00    US    Net long term TIC flows
•    15:00    US    Philadelphia Fed index
•    15:00    US    NAHB Housing market index
•    16:10    US    Fed’s Bernanke speaks

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