By the close of trade on Wednesday, the South African rand strengthened against the US dollar.

  • Progress in the development of a COVID-19 vaccine boosted investors risk appetite.
  • The heat on China ratchets up as The Trump administration is considering a sweeping ban on travel to the United States by members of the Chinese Communist Party and their families.  This come fast on the heels as China avoided a recession after its economy grew by 3.2 per cent in the second quarter of 2020, indicating a recovery from the damage caused by the coronavirus pandemic. The world’s second largest economy had shrank by 6.8 per cent in the first three months of the year, the first contraction since the end of the Cultural Revolution in 1976.
  • On data front, South Africa’s consumer price index (CPI) slowed to its lowest level since September 2004 on an annual basis in May, mainly due to a fall in fuel prices.
  • In the US, factory output increased for a second straight month in June, as motor vehicle production accelerated amid the reopening of businesses.
  • The NY empire state manufacturing index for July posted its first positive reading since February.
  • The Federal Reserve’s (Fed) Beige Book Report Economic activity increased in almost all Districts, but remained well below where it was prior to the COVID-19 pandemic. Consumer spending picked up as many nonessential businesses were allowed to reopen. Retail sales rose in all Districts, led by a rebound in vehicle sales and sustained growth in the food and beverage and home improvement sectors. Leisure and hospitality spending improved, but was far below year-ago levels. Most Districts reported that manufacturing activity moved up, but from a very low level. Demand for professional and business services increased in most Districts, but was still weak.
  • The yield on benchmark government bonds fell yesterday. The yield on 2026 bond fell to 7.56%. Further, the yield on 2023 bond declined to 4.72% while that for the longer-dated 2030 issue fell to 9.35%.

In early trade on Thursday, the US dollar is trading 0.4% higher against the South African rand at R16.6569, while the euro is trading 0.3% higher at R18.9939.  The British pound has gained 0.1% against the South African rand to trade at R20.9135.

By the close of trade on Wednesday, the euro declined against most of the major currencies.

  • The European Central Bank and its president, Christine Lagarde, face another crucial test this week as they hold off on any new monetary stimulus, but try not to destroy a belief that more firepower is available. The Frankfurt institution will likely stay put after last month’s extension and enlargement of its PEPP (Pandemic Emergency Purchase Program), which climbed by 600 billion euros ($686 billion) to 1.35 trillion euros. As the lender of last resort, the ECB has stabilised markets and prevented a major financial crisis which would have exacerbated the recession.
  • The Bank of England policymaker, Silvana Tenreyro, stated that the Britain’s economic recovery would probably take the shape of an incomplete V as consumers stay wary of the coronavirus, social distancing rules curb activity and unemployment rises.
  • On the data front, UK CPI rose on an annual basis in June, spurred by rising prices for in-demand video game consoles during the coronavirus lockdown.

In early trade on Thursday, the euro has slipped 0.1% against the US dollar to trade at $1.1404, while it has gained 0.2% against the British pound to trade at GBP0.9083.





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