By the close of trade on Friday, the South African rand weakened against the US dollar, as fears a of second wave of COVID-19 infections in Europe rattled investor sentiment.

  • The risk-off environment persists with the second wave of coronavirus infections the main driver.  US cases continued to accelerate over the weekend, with cases climbing 0.7% on Saturday, in line with the recent increase in the 7-day average. The pace of deaths slowed, however, with the US seeing only 740 new deaths yesterday, snapping a 4-day streak of 900+ deaths. However, global numbers are more important right now. Countries around the world reported just 277,937 new cases on Saturday, down from a peak a few days ago. This brought the total to 32.8 million. Another 5,279 deaths were reported, bringing the death toll to 994,000, within striking distance of the 1 million-death milestone.  India’s Health Ministry says reported coronavirus cases in the country have surpassed 6 million.
  • China has asked some companies to halt imports of frozen foods from certain countries.
  • The dollar hovered near a two-month peak against at a basket of currencies on Monday as investors look to a barrage of upcoming economic data and political developments in the United States before making any fresh bets on the U.S. currency. While a rebound in U.S. stocks on Friday has helped to curb the ascent of the dollar, deemed as a safe-haven, signs of slowdown in the nascent economic recovery and political uncertainties have kept investors on guard. The dollar index stood at 95.544 =USD. Last week it hit a two-month high of 94.745 last week and posted its biggest weekly rise since early April.
  • The past 24 hours have just seen a slight pause in the recent risk negative/dollar positive move across major markets. It comes as some chinks of light start to form in the will they/won’t they saga of a US fiscal support package. The Democrats have drafted a $2.4 trillion package that want to negotiate on and potentially hold a vote next week. It would be another shift in the risk narrative and help to improve sentiment once more if it is achieved. Wall Street closed a choppy session last night in positive territory, whilst futures are again pointing higher today. It comes with the dollar rally also on pause.
  • In the US, durable goods orders rose for the fourth straight month in August, suggesting that a rebound in business spending on equipment was underway after a prolonged slump.
  • The yield on benchmark government bonds rose on Friday. The yield on 2026 bond advanced to 7.29%. Further, the yield on 2023 bond climbed to 4.57%, while that for the longer-dated 2030 issue rose to 9.50%.

In early trade on Monday, the US dollar is trading 0.3% lower against the South African rand at R17.0892, while the euro is trading 0.2% lower at R19.8833.  The British pound has declined 0.1% against the South African rand to trade at R21.8298.

On Friday, the euro declined against most of the major currencies.

  • A recent strengthening in the euro’s exchange rate is a worry and will warrant a reaction from the European Central Bank if it drags inflation farther away from its goal, an ECB policymaker stated.
  • Britain is on course for a no-deal Brexit with trade talks between the UK and EU unlikely to end in a deal, according to Ireland’s leader. Taoiseach Micheál Martin said the UK’s controversial Internal Market Bill had “eroded trust” between the two sides, with Europe no longer confident that Britain’s word can be relied upon.
  • Swiss voters have rejected a proposal to end an accord with the EU allowing the free movement of people. With all referendum votes counted, nearly 62% said they wanted to keep free movement, while 38% were against. Switzerland is not a member of the EU but has a series of interdependent treaties with Brussels which allow it to access to Europe’s free trade area.

Markets are set to remain choppy as we head to month end and a lot of local and international data releases this week. Locally we have PPI today and CPI and trade balance numbers later in the week. From the US we have employment numbers on Friday.  We are officially less than 40 days away from the US general election on November 3, and the polls so far continue to show Democratic nominee Joe Biden maintaining a strong lead over the incumbent. Polling data taken as of today show the former Vice President keeping an above-average lead vs Donald Trump as the two prepare for their first one-on-one debate on September 29.

In early trade on Monday, the euro marginally advanced against the US dollar to trade at $1.1644, while it has weakened 0.1% against the British pound to trade at GBP0.9122.

A cold a wet morning across the 031.  Drive safely and have a great week ahead.