LOCKDOWN LEVEL Ver 3.2 [DAY 32] [Announcement due in next 3 days]
TOTAL DAYS 140 – 07 HOURS 15 MINUTES
The Rand held it’s ground on Thursday trading in a narrow band many factors considered.
- In South Africa, the ghost of winters past popped up and state utility firm, Eskom, announced that breakdowns of some its generating units had forced it to resume countrywide blackouts. The President was meeting with Key role-players inter alia NEDLAC, and is to meet the Premiers shortly perhaps later today.
- The US Presidential race hotted up as Presidential hopeful Joe Biden announced his running mate Senator Kamala Harris. The 53 year old holds a seat on the Senate and has been an outspoken critic of Biden in the past. The Trump camp and Republicans immediately jumped into the debate..watch this space.
- For the greenback, Friday’s US retail sales and University of Michigan consumer sentiment index are the most important economic reports on this week’s calendar. Investors have been looking forward to two things since Monday – progress on stimulus talks and an update on the recovery. Inflation data, while interesting has very little impact on the markets in a zero interest rate world with no changes by central banks in the foreseeable future.
- Talks in Congress stalled with no signs of progress after a pivotal call between House Speaker Pelosi and Treasury Secretary Mnuchin. Hiring at small businesses, shifts worked across a range of industries, credit card spending and even gasoline demand that typically grows through the summer remained flat and mired far below the levels a year ago. Initial filings for unemployment insurance did fall below 1 million for the first time since the March onset of the coronavirus-driven economic downturn, and the number of people continuing to collect benefits.
- King dollar still reigns supreme. And that means there are two ways for banks to go: the U.S. way, or the highway. Hong Kong and Chinese officials scoffed when the Trump administration imposed sanctions last weekend on 11 individuals deemed to have played a role in undermining the city’s autonomy.
- The Pound-to-Dollar rate has become a key battleground for Euro bulls as the trade-weighted single currency scales new highs, throwing a spanner in the works of a market looking to see more losses for the greenback and a sustained European outperformance of the British currency. Sterling was an outperformer ahead of Thursday’s close after a noon correction in major exchange rates gave way to a faster recovery in the Pound-to-Dollar rate than was seen with other currencies relative to the greenback, with that playing out amid an update on the Brexit negotiations.
- Japan’s pandemic-hit economy shrank last quarter by the most in records going back to 1955, official data is set to show Monday, with a resurgence of the virus threatening to slow a fragile recovery now under way. Analysts see gross domestic product contracting at an annualized pace of 27% in the three months through June. That means the world’s third-largest economy will have declined in size for three straight quarters, hit first by trade wars and a sales tax hike, then by the virus. The cratering of Japan’s economy follows grim readings from other major countries reeling from the impact of Covid-19.
- The unemployment rate of 7.1% is not a good measure of the situation French unemployment figures released this week remind us of the precarious situation of the French labour market.
- Mexico’s central bank cut its key interest rate to a four-year low, possibly the final reduction of the current easing cycle, as inflation reemerges amid a deep recession. Banco de Mexico, led by Governor Alejandro Diaz de Leon, lowered borrowing costs by a half point to 4.5%, in line with 22 of 24 estimates in a Bloomberg survey. The other two expected a quarter-point cut. Policy makers are stuck between the recent pick-up in inflation and prospects of the worst economic contraction in nearly a century as the coronavirus pandemic saps demand.
- The yield on benchmark government bonds mostly rose yesterday. The yield on 2026 bond rose to 7.38%. Further, the yield on 2023 bond advanced to 4.42% while that for the longer-dated 2030 issue fell to 9.24%.
In early trade on Friday, the US dollar is trading 0.1% higher against the South African rand at R17.4307, while the euro is trading marginally higher at R20.5806. The British pound has declined 0.1% against the South African rand to trade at R22.7522.
By the close of trade on Thursday, the euro declined against most of the major currencies.
- On the data front, German consumer price index (CPI) fell in line with market expectations on a monthly basis in July.
In early trade on Friday, the euro has slipped 0.1% against the US dollar to trade at $1.1807, while it has marginally gained against the British pound to trade at GBP0.9045.Enjoy your weekend.
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