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

  • Buoyed by a Risk On appetite worldwide as a coronavirus vaccine [AstraZeneca] trial was back on track and as market participants looked forward to central bank meetings in South Africa, UK, US and Japan.
  • In SA the Minister of Cooperative Governance extended the National State of Disaster through to the 15th October 2020.
  • The price trend for the US dollar since the middle of March has been downward, and it looks like it will continue to fall through the end of the year. World forces point to the dollar continuing to decline in value and recent movements in US money market conditions point to an outflow of funds in the fourth quarter. The only offset might be the Federal Reserve, but it may be limited in what it can do, especially since there is a presidential election going on.
  • The yield on benchmark government bonds fell yesterday. The yield on 2026 bond fell to 7.14%. Further, the yield on 2023 bond declined to 4.40% while that for the longer-dated 2030 issue fell to 9.27%.

In early trade on Tuesday, the US dollar is trading 0.3% lower against the South African rand at R16.6354, while the euro is trading 0.1% lower at R19.7561.   The British pound has declined 0.2% against the South African rand to trade at R21.3635.

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

  • Meanwhile, the eurozone industrial production rose less than expected on a monthly basis in July.
  • Members of the Central banks commenced their discussion of international developments by noting that the global economy had started to recover around May as containment measures were eased and the extensive fiscal and monetary support had begun to take effect. However, more recently the global recovery had slowed and become more uneven, with infection rates rising again in some countries. Further fresh outbreaks of the virus had been seen in Japan, South Korea, some countries in Western Europe and New Zealand. This had led to a targeted tightening in restrictions, and some renewed signs of precautionary behavior.
  • In the UK, Boris Johnson has won a first victory in his Government’s Brexit plans to change the exit deal.  The risk of a hard “no-deal” Brexit at the end of this year rose last week, weighing on U.K stocks and the British pound, and pushing U.K. monetary policy rate expectations into negative territory. But, as the Brexit battle moves to the endgame, there may be potential opportunity for investors. The current flare up is fueled by U.K. legislation that would change key elements of the Brexit Withdrawal Agreement including subsidies and Northern Ireland trade that apply if a free trade deal is not reached. This is threatening to derail trade talks that must be finalized within a month.
  • Yoshihide Suga was elected as the new head of Japan’s ruling party on Monday, all but assuring that he will become the country’s new prime minister when a parliamentary election is held later in the week. Despite his low-key image, Suga, 71, has been an important figure in outgoing Prime Minister Shinzo Abe’s administration, serving as the government’s top spokesperson in his role as chief Cabinet secretary. Abe announced last month that he would resign due to health problems. Suga’s victory in the ruling Liberal Democratic Party vote virtually guarantees his election in a parliamentary vote Wednesday.

In early trade on Tuesday, the euro has advanced 0.2% against the US dollar to trade at $1.1887, while it has gained 0.1% against the British pound to trade at GBP0.9250.

Top 10 Countries by GDP (2019)

Rank Country GDP % of Global GDP
#1  U.S. $21.4T 24.4%
#2  China $14.3T 16.3%
#3  Japan $5.1T 5.8%
#4  Germany $3.9T 4.4%
#5  India $2.9T 3.3%
#6  UK $2.8T 3.2%
#7  France $2.7T 3.1%
#8  Italy $2.0T 2.3%
#9  Brazil $1.8T 2.1%
#10  Canada $1.7T 2.0%
Top 10 Countries $58.7 trillion 66.9%