LOCKDOWN LEVEL 2 [DAY 2]
TOTAL DAYS 146 – 07 HOURS 30 MINUTES
By the close of trade on Tuesday, the South African rand strengthened against the US dollar.
- Market sentiment improved after South Africa moved to Level 2 of the coronavirus-enforced lockdown, with the sale of tobacco and alcohol being permitted for the first time in five months.
- In the US, homebuilding accelerated by the most in nearly four years in July, in the latest sign that the nation’s housing sector is emerging as one of the few areas of strength in an economy suffering a record slowdown because of the COVID-19 pandemic. Building permits also accelerated on a monthly basis in July.
- On the trade front, the US President, Donald Trump, has postponed trade talks with China and the country imposed further restrictions on Huawei, fueling concerns about the mounting tension between the US and China. Trump rattled Chinas ire and says there will be no more talks with China for now. When asked if the US were pulling out of the trade deal Trump remarked “we’ll see”!
- On Tuesday, the US Dollar was bearish against all of its major currency pairs while the US Dollar Currency Index broke below its 92.50 level, reaching a low last seen in May 2018. On the U.S. economic data front, Housing Starts jumped to 1,496K on month in July (1,245K expected), from a revised 1,220K in June. Building Permits increased to 1,495K on month in July (1,326K expected), from a revised 1,258K in June. On Wednesday, the Mortgage Bankers Association’s Mortgage Applications data for the week ending August 14th is expected. Finally, the Federal Open Market Committee is expected to release its Meeting Minutes.
- The yield on benchmark government bonds mostly fell yesterday. The yield on 2026 bond rose to 7.45%. Further, the yield on 2023 bond declined to 4.47% while that for the longer-dated 2030 issue fell to 9.25%.
In early trade on Wednesday, the US dollar is trading 0.1% higher against the South African rand at R17.3315, while the euro is trading 0.1% higher at R20.6922. The British pound has gained 0.1% against the South African rand to trade at R22.9534.
By the close of trade on Tuesday, the euro declined against most of the major currencies.
- The European Central Bank (ECB) Vice President, Luis de Guindos, stated that European banks are unlikely to recover from the coronavirus crisis before 2022. More than 360 billion euros ($425 billion) of loans at Europe’s biggest banks have been subject to payment breaks or other coronavirus relief measures but the big question is whether borrowers will be able to resume payments when support ends. At the direction of governments and regulators, lenders have granted millions of consumers and companies breathing space to help them deal with the financial fallout from the pandemic.
In early trade on Wednesday, the euro has advanced 0.1% against the US dollar to trade at $1.1937, while it has marginally gained against the British pound to trade at GBP0.9014.