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Daily Dose

7 December 2018

Good Morning,

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On the wires

Dow rebounds from 780-point plunge, ends day just slightly lower on report Fed may pause hikes…Trump seen naming former Fox News personality as next UN ambassador…Asian stocks take a breather after days of declines…US Marines midair plane crash…All-clear given after CNN's NYC office evacuation…Eskom's Looming ‘Death Spiral’ Menaces South African Economy…Shock and horror over quality of Johannesburg and Pretoria drinking water…Five farm attacks in 48 hours leave rural communities in shock…Eskom keeps Stage 2 in place for Friday 7 December…Man hospitalised after Alexandra community accuse him of arson…Oosthuizen hungry for more Open glory…Mayweather says he will hold exhibition with Japanese star…Liverpool's Gomez to miss 6 weeks because of broken leg…Real Madrid complete 10-1 aggregate thrashing of Melilla…Guatemala ex-soccer chief avoids jail in FIFA scandal.

Fun Friday

Currency Crackdown

The rand weakened above 14/$ yesterday after SA’s 3rd quarter current account deficit widened to R176.6B from the R167.4B recorded in the 2nd quarter. The disappointing data added to an already gloomy outlook on the rand, which peaked at 14.21/$ after opening around 13.90/$ yesterday. The rand has been put pressure recently by Eskom’s load-shedding and its potential impact on economic growth, as well as concerns over parliament’s decision to amend the constitution to allow for land expropriation without compensation. Meanwhile, concerns over of a flare up in US/China relations also weighed on the rand and other emerging market currencies after the arrest of the CFO of Chinese tech giant Huawei in Canada.

This morning we find the rand trading firmer at 14.06/$ following an overnight recovery after Fitch kept SA’ credit rating steady at just below investment grade. It also found support as the dollar weakened on the back of expectations that the widely expected rate hike later this month could be the last before the Fed puts a pause on its tightening cycle. Markets are now only pricing in one more hike from the Fed in 2019, compared with previous expectations for two and possibly even four rate hikes earlier this year.

The major focus today will be on the release of US non-farm payrolls, unemployment and wage data for clues to how the US economy is performing, which will provide further guidance on how the Fed could approach future rate hikes. We also expect to see German Industrial Production, EU Unemployment, EU GDP and US Wholesale Inventories figures later today. Local Gross and Net Reserve figures came out slightly higher than the previous month this morning.

In other markets, US stocks recovered from a major selloff to close only marginally lower, with Asian stocks slightly firmer as a result this morning. Gold is trading higher on the back of the weaker dollar and rising geopolitical tensions, while oil is weaker.

Did you know?

A heatwave can make train tracks bend!

Have a lovely weekend,

FXOne Team

 

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