(04 MAY 2017)DAILY MARKET BRIEF 1:EM currencies in the doldrums ahead of NFP and French election

Emerging markets currencies tumbled on Thursday amid a sharp correction in commodity prices and mounting expectations of a June Fed rate hike. The West Texas Intermediate hit $47.31 a barrel this morning while its counterpart from the North Sea fell to $50.26 amid supply glut worries. In China, the price of iron ore fell as much as 8% overnight, before trimming losses at around -5%, amid concerns over weak demand. Iron ore futures for delivery in September on the Dalian Commodity Exchange slid to CNY 499 a metric ton.

The South African rand was the worst performing currencies this morning as it tumbled 0.60% against the greenback. The rand retraced more than half of last month’s gains as the country’s unstable political landscape takes centre stage once again. The anti-Zuma sentiment is mounting in the country and international investors definitely do not like it. USD/ZAR has broken the 13.3294 resistance (Fibonacci 38.2% on March-April rally) and is currently heading for the following one at 13.6316 (200dma), if broken the road is wide open towards 13.9578 (high from April 10). We therefore maintain our negative view on the currency and wait for a period of stabilization before betting on a correction.

By Arnaud Masset