Good morning

	High	Low			High	Low
EUR/USD	1.1139	1.1098		USD/ZAR	15.4900	15.3100
GBP/USD	1.4348	1.4296		GBP/ZAR	22.20	21.94
EUR/GBP	0.7779	0.7735		USD/RUB	77.32	75.62
GBP/EUR	1.2928	1.2855		USD/ILS	3.9206	3.9010
USD/JPY	113.38	112.70		S&P 500	1926	1916
GBP/CHF	1.4265	1.4181		Oil (Brent)	34.85	34.12
GBP/AUD	2.0186	1.9994		Gold	1233.0	1220.0

I’ll start off with the ZAR. Local markets seem to be in a good mood these days as the ZAR recorded another super day trading as “high” as 15.25 vs the USD. Basically inflation came out at 6.25% (Wed) above the SARB’s target of 6% which led to traders assuming the SARB could well raise rates again (March) to stem the rise in inflation. Higher ZAR rates =  stronger ZAR. Keep in mind the Finance Minister is addressing parliament next Wednesday, so all eyes will be on that speech (especially considering the changes we have seen in recent months at the FM offices).

The GBP is certainly enjoying some volatility with the PM trying to negotiate a deal for the UK. Over the past 72 hours the GBP has dropped from over 1.44 to sub 1.43, and has since rallied slightly to 1.4325 as I write this. Regardless of the outcome I think the GBP is facing a bleak future. If there is to be a referendum in June, the UK needs an agreement in place with the EU. Should the PM succeed we view this as GBP positive initially. However as we saw when the Scottish referendum took place, the GBP was battered and I see no differences here (EU referendum). Short term then a positive outcome in Brussels will see the GBP rally vs the USD and EUR…until reality sets in and a date for the referendum is announced. A failure in Brussels will have the opposite effect and see the GBP fall vs her trading partners. It really is all or nothing.

With talk that the ECB could potentially lower depo rates again and add/extend QE, the EUR has found some support. Weaker US data has contributed to the EUR rally. For now I see EURUSD range bound as traders cite lack of event and fundamental risk. All eyes on the next US NFP (payroll) numbers on 4th March.

Have a good weekend

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