LOCKDOWN LEVEL 1 [DAY 2]
TOTAL DAYS 182 – 07 HOURS 40 MINUTES
By the close of trade on Tuesday, the South African rand weakened against the US dollar.
- Investors digested reports related to rising COVID-19 infections in some countries and the prospects of new lockdowns. The most likely outcome of the “horse races” to win the White House and produce a Covid-19 vaccine is a policy mix that favors a weaker dollar by the end of the year, according to economists.
- The US dollar traded higher against all of the major currencies on Tuesday on the back of relatively neutral comments from Federal Reserve Chairman Jerome Powell. Powell, pledged continued support for an economy that he said has shown substantial improvement but still needs more work.
- The yuan is curbing the dollar’s dominance in driving price action among Group-of-10 currencies as Covid-19 reshapes global financial markets. The Chinese currency [renminbi] is increasingly influencing weekly price changes in the pound and commodity-linked currencies such as the Australian, New Zealand and Canadian dollars.
- On the data front, Existing Home Sales rose to 6.00 million on month in August (as expected), from 5.86 million in July, a level last reached in late 2006. On Wednesday, the Mortgage Bankers Association’s Mortgage Applications data for the week ending September 18th is expected. Finally, Markit’s US Manufacturing Purchasing Managers’ Index for the September preliminary reading is expected to rise to 53.5 on month, from 53.1 in the August final reading.
- The yield on benchmark government bonds mostly rose yesterday. The yield on 2026 bond advanced to 7.27%. Further, the yield on 2023 bond declined to 4.57%, while that for the longer-dated 2030 issue climbed to 9.39%.
In early trade on Wednesday, the US dollar is trading 0.2% higher against the South African rand at R16.8262, while the euro is trading 0.1% lower at R19.6596. The British pound has gained 0.1% against the South African rand to trade at R21.4088.
By the close of trade on Tuesday, the euro declined against most of the major currencies.
- As expected, the markets had a tough start to the week. There were a couple of technical factors, but the COVID situation is apparently still driving consumer sentiment. That’s likely to continue to be the theme for the data coming out of Germany this week. Analysts are a little more optimistic. Maybe some improving market fundamentals can help turn around risk sentiment. Germany’s Consumers are lagging with the lifting of COVID restrictions at the start of summer, consumer sentiment in Germany started to improve. Then, during the vacation period of August and now going into September, the number of cases has risen sharply.
- The RBNZ meets on Wednesday to review monetary policy after the latest rate announcement (12 August) was accompanied by an expansion of its Large Scale Asset Purchase (LSAP) programme. Since the last meeting, growth data for the second quarter has been released, confirming fears of a bigger slump in New Zealand than its peers (-12.4% YoY), both due to the ultra-strict lockdown measures and the structural exposure of the economy to slowdowns in global trade and tourism.
- The preliminary eurozone consumer confidence registered an improved reading for September.
In early trade on Wednesday, the euro has slipped 0.2% against the US dollar to trade at $1.1681, while it has weakened 0.1% against the British pound to trade at GBP0.9183.