LOCKDOWN PHASE 4 – DAY 49 07 HOURS 07 MINUTES
By the close of business on Thursday, the South African rand strengthened against the US dollar.
- Meanwhile, South African President, Cyril Ramaphosa hinted that metropolitan areas might remain on an “alert level 4” lockdown.
- President Donald Trump may be warming to a strong dollar after years of bashing the U.S. currency’s stubborn appreciation. “It’s a great time to have a strong dollar … Everybody wants to be in the dollar because we kept it strong. I kept it strong,” Trump has said.
- Another “big setback” in the U.S. economy could prompt the Federal Reserve to consider cutting interest rates into negative territory — but such a monetary policy wouldn’t be “very helpful,” a Goldman Sachs strategist said on Thursday. Fed Chairman Jerome Powell on Wednesday reiterated that the central bank is not considering negative interest rates at this point, even as other central banks — such as the Bank of England — appeared to be opened to the idea.
- In the US, number of people filling for unemployment benefits came in more-than-expected for the week ended 8 May 2020.
- The Minneapolis Federal Reserve (Fed) President, Neel Kashkari, stated that a V-shaped recovery is off the table. He added that while there will be a bounce after the worst gross domestic product (GDP) contraction in the April-June quarter in history, the economy will be nowhere near back to where it was in December 2019.
- The possibility of another trade war is back. President Trump has said he will terminate the phase one deal if China does not live up to the goal of increasing imports from the US by a total of US$200 billion the end of 2021. Once again, Trump is willing to apply tariff hikes (or at least threaten their use) to other policy areas than just trade. He called tariff hikes ‘the ultimate punishment’ if China does not allow non-Chinese experts to be involved in the search for the origin of Covid-19.
- The U.S. Departments of State and Treasury, and the U.S. Coast Guard, issued a global advisory to alert the maritime industry, and those active in the energy and metals sectors, to deceptive shipping practices used to evade sanctions, with a focus on Iran, North Korea, and Syria. The advisory includes a detailed set of best practices for private industry to consider adopting to mitigate exposure to sanctions risk. The advisory updates and expands upon previous advisories issued by the U.S. government.
- The yield on benchmark government bonds reflected the sour risk mood, ending mostly higher yesterday. The yield on 2026 bond rose to 7.88% and that for the longer-dated 2030 issue rose to 9.60%. Meanwhile, the yield on the 2023 bond declined to 5.16%.
In early trade on Friday, the US dollar is trading 0.1% higher against the South African rand at R18.4620, while the euro is trading 0.1% higher at R19.9453. The British pound has declined 0.1% against the South African rand to trade at R22.5351.
By the close of trade, the euro declined against most of the major currencies.
- The European Central Bank (ECB) in its latest economic bulletin, reiterated that it stands ready to do everything necessary to support the euro area during the coronavirus crisis. It is fully prepared to increase the size of its emergency bond purchases and to adjust their composition by as much as necessary and for as long as needed.
- On the data front, German consumer price index (CPI) rose on a monthly basis in April.
In early trade on Friday, the euro slipped 0% against the US dollar to trade at $1.0804, while it has gained 0.2% against the British pound to trade at GBP0.8851.
Below is a link to a very detailed Covid-19 picture giving stats and graphs.