LOCKDOWN LEVEL 3 [DAY 2]
TOTAL DAYS 67 07 HOURS 31 MINUTES
By the close of trade on Monday 1st June 2020, the South African rand strengthened against the US dollar.
- Hopes of economic recoveries at home and abroad dawned on the 1st day of June 2020, as more countries eased lockdown restrictions and here at home the country dived head first into level 3. Investors have marched into June with a renewed appetite for risk after President Donald Trump’s response to China’s new law reining in Hong Kong was not as bad as initially feared. It looks like market players are dumping in favour of riskier currencies amid the growing optimism and this continues to be reflected across the G10 space.
- President Donald Trump late Monday threatened to mobilize the U.S. military to keep the peace across the nation, following days of violent protests. Speaking at the Rose Garden of the White House, Trump derided governors for not acting more harshly against demonstrators, and said he was deploying “heavily armed” soldiers and police in Washington to quell protests.
- In the US, ISM manufacturing PMI eased off an 11-year low in May, the strongest sign yet that the worst of the economic downturn was behind as businesses reopen. The Federal Reserve Bank of Atlanta’s rolling “nowcast” of real gross domestic product growth estimates the nation’s economy will contract 52.8% in the current quarter. The Atlanta Fed’s latest estimate is down from a May 29 projection of -51.2% growth, and factors in the Institute of Supply Management’s Monday report.
- Construction spending fell less-than-expected in April, even as other sectors of the economy buckle under the COVID-19 crisis.
- In other news, Chinese government officials told major state-run agricultural companies to pause purchases of some American farm goods, including pork and soybeans
- On the data front, South Africa’s Absa manufacturing PMI slightly recovered in May, from April’s record low.
- The yield on benchmark government bonds fell yesterday. The yield on 2026 bond fell to 7.50%. Further, the yield on 2023 bond declined to 5.17% while that for the longer-dated 2030 issue fell to 8.76%.
In early trade on Tuesday, the US dollar is trading 0.2% higher against the South African rand at R17.4086, while the euro is trading 0.1% higher at R19.3634. The British pound has gained 0.2% against the South African rand to trade at R21.7376.
By the close of trade on Monday, the euro declined against most of the major currencies.
- Negative interest rates may eventually become unavoidable in the U.K., especially if there is a no-deal Brexit at the end of the year. The Bank of England would likely cut rates to -0.1% in the middle of 2021 if the U.K. leaves the European Union without a new trade deal in place.
- German manufacturing PMI further contracted in May, as factories facing weak demand because of the coronavirus pandemic laid off staff.
- Eurozone manufacturing PMI registered further contraction for May, as government-imposed lockdowns due to the coronavirus pandemic keep demand in check.
- French manufacturing activity rose in May, as the country began to emerge from a nearly two-month coronavirus lockdown.
In early trade on Tuesday morning, the euro has slipped 0.1% against the US dollar to trade at $1.1124, while it has weakened 0.1% against the British pound to trade at GBP0.8908.
Below is a link to a very detailed Covid-19 picture giving stats and graphs.