LOCKDOWN DAY [LEVEL 4] – DAY 62 07 HOURS 10 MINUTES
By the close of trading on Wednesday, the South African rand strengthened against the US dollar.
- The House of Representatives on Wednesday passed legislation calling for sanctions against Chinese officials for the detention and torture of Uighur Muslims in the country’s western region of Xinjiang as tensions between the U.S. and China continue to escalate. The legislation, which passed overwhelmingly in the Senate earlier this month, will now head to President Donald Trump, who has not said whether he intends to sign it into law.
- In the US, the Federal Reserve’s (Fed) Beige Book report indicated that economic activity sharply fell in most of its 12 districts, amid mass unemployment and challenges in bringing employees back to work during the pandemic.
- The New York Fed Bank President, John Williams, stated that the central bank was thinking hard about the possibility of targeting bond yields to keep US borrowing costs low.
- Americans likely filed 2.1 million initial jobless claims last week, lifting the total through Covid-19 to 41 million and suggesting the unemployment rate will continue surging to fresh record highs.
- The yield on benchmark government bonds mostly rose yesterday. The yield on 2026 bond rose to 7.73%. Further, the yield on 2023 bond advanced to 5.41% while that for the longer-dated 2030 issue fell to 8.98%.
In early trade on Thursday, the US dollar is trading 0.3% lower against the South African rand at R17.3273, while the euro is trading 0.2% lower at R19.0949. The British pound has declined 0.3% against the South African rand to trade at R21.2602.
By the close of trade on Wednesday, the euro advanced against most of the major currencies.
- The South African Reserve Bank says SA’s financial system is under stress and headed for “extraordinary shocks”, as people are expected to struggle servicing their debt or keep their insurance policies in place, while those who still have money to save and invest are already opting for short-term deposits.
- Diesel shortages might continue until mid-June, and it is likely to hit KwaZulu-Natal and the interior of the country most.
- The South African Petroleum Industry Association (Sapia) announced yesterday that the country had begun to implement diesel rationing. The association expects the shortage to last until the end of the month.
- The European Central Bank (ECB) President, Christine Lagarde, stated that the eurozone economy is likely to contract along the lines previously outlined in the bank’s medium to severe scenarios, ruling out the “mild” possibility. The severe outlook is for a 12.0% GDP decline and the medium scenario is for an 8.0% drop, while the mild was for a 5.0% drop.
- The European Union has a habit of disappointing when trying to design a joint response to an economic crisis. However, Ursula von der Leyen’s speech at the European Parliament on Wednesday about a pandemic recovery fund could well be one for the history books. The Commission president outlined a 750 billion-euro ($825 billion) rescue program to help the bloc cope with the fallout from Covid-19.
- China is set to gain first mover advantage with the launch of a digital currency in the post-virus era as social distancing, remote working and online commerce become part of everyday life. While its ambition of dethroning the US dollar is a long-term goal, China will certainly push forward internationalization of the yuan currency via increased cross-border usage.
In early trade on Thursday, the euro ha advanced 0.1% against the US dollar to trade at $1.1021, while it has gained 0.1% against the British pound to trade at GBP0.8982.
Below is a link to a very detailed Covid-19 picture giving stats and graphs.