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

  • In the US, the Federal Reserve’s (Fed) Beige Book report showed that US business activity and employment ticked up through late August, but economic growth was generally sluggish as COVID-19 hotspots hampered reopening efforts.
  • On the data front, private sector employment rose less-than-expected in August, suggesting that the labour market recovery was slowing as the COVID-19 pandemic persists. Meanwhile, factory orders rose more-than-expected on a monthly basis in July, reflecting a rebound in manufacturing after the economy reopened.
  • Private data sources that have tracked the unemployment recovery showed that job growth was tepid in August after political leaders in Washington failed to reach an agreement on new relief packaged before the CARES Act expired at the end of July. Data from staffing firm Homebase showed that the time worked by hourly employees at small and medium business was still more than 20% below pre-pandemic levels, barely budging from the results in July. The data, along with similar information from Kronos and weekly unemployment claims, seem to show a labor market recovery that has been stuck in neutral .
  • The yield on benchmark government bonds rose yesterday. The yield on 2026 bond advanced to 7.25%. Further, the yield on 2023 bond rose to 4.46%, while that for the longer-dated 2030 issue edged up to 9.13%.

In early trade on Thursday, the US dollar is trading marginally higher against the South African rand at R16.8656, while the euro is trading 0.2% lower at R19.9164.  The British pound has declined 0.1% against the South African rand to trade at R22.4417.

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

  • Bank of England Deputy Governor Dave Ramsden and another interest-rate setter, Gertjan Vlieghe, warned of risks that Britain’s economy could suffer more damage from the coronavirus crisis than spelt out by the central bank last month. Ramsden told lawmakers on Wednesday that the BoE had estimated the level of Britain’s economic output would permanently be about 1.5 percentage points lower than it would have been without the pandemic.
  • ECB Chief Economist, Philip Lane, stated that the exchange rate “does matter” for monetary policy. This comes after the euro briefly rose above $1.20 to the greenback for the first time in over two years, pushing the price of imports from the region higher.   The euro’s rise is worrying top policymakers at the European Central Bank, who warn that if the currency keeps appreciating it will weigh on exports, drag down prices and intensify pressure for more monetary stimulus.
  • On the data front, German retail sales unexpectedly fell on a monthly basis in July.
  • COVID-19 infections in Europe are back to levels seen in March when the outbreak began its peak phase there, the head of the European Union’s public health agency said on Wednesday, noting however school reopening’s did not necessarily pose new risks.
  • As the Brexit negotiations have stalled, the risk of a no-trade-deal Brexit increases. At the same time, both sides still seem to prefer a deal over no deal and the British government in particular can ill-afford yet another policy setback Given the little amount of time available and the divergent strategies of both sides, the scope of the agreement remains limited Such a limited agreement will have negative ramifications for the UK economy and, to a lesser extent, the EU economies that have a close economic relationship with the UK.
  • The Australian dollar has spiked some 28% since a year-to-date low in March. As the country fell into recession in the second quarter, however, analysts were mixed on where the currency is headed. In March, the Aussie dollar fell to a year-to-date closing low of $0.5738 against the greenback as the coronavirus crisis intensified, and lockdown measures were triggered nationwide. Defying the country’s weak economic outlook, the currency continued strengthening in the past few months. It briefly broke through the 0.74 mark this week, and reached a two-year peak, according to Reuters estimates.

In early trade on Thursday, the euro has slipped 0.2% against the US dollar to trade at $1.1826, while it has weakened 0.1% against the British pound to trade at GBP0.8873.