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

  • Ten Republicans sided with Democrats to impeach the president by 232-197. But his trial in the Senate will not happen until after Joe Biden, a Democrat, is inaugurated as the new US president next week. Trump, a Republican, is the first president in US history to be impeached twice.

The Democratic-controlled House voted on Wednesday after two hours of impassioned debate as armed National Guard troops kept watch inside and outside          the Capitol. The FBI has warned of possible armed protests planned for Washington DC and all 50 US state capitals ahead of Mr. Biden’s inauguration on 20 January.

  • In the US, the Federal Reserve (Fed) Vice Chair, Richard Clarida stated that the US central bank won’t raise interest rates until inflation reaches its 2.0% target.
  • The Fed’s beige book indicated that the US economic activity increased modestly in recent weeks, while a growing number of the Fed’s districts saw a drop in employment as a surge in coronavirus cases led to more business shutdowns.
  • On the data front, US consumer price index (CPI) increased solidly in December, amid a surge in the cost of gasoline.
  • The yield on benchmark government bonds fell yesterday. The yield on 2026 bond fell to 6.62%. Further, the yield on 2023 bond declined to 4.48%, while that for the longer-dated 2030 issue fell to 8.75%.

In early trade on Thursday, the US dollar is trading marginally lower against the South African rand at R15.2566, while the euro is trading lower at R18.5238.  The British pound has declined against the South African rand to trade at R20.8026.

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

  • Negative interest rates are unlikely at the Bank of England (BoE) if the latest remarks from Governor Andrew Bailey and Pound Sterling’s response to them are anything to go by, although the matter is not decisively settled and at least some derivation of the controversial policy could yet be implemented. Sterling was vying for the top spot among major currencies for the week on Wednesday, with gains arising mostly after BoE Governor Bailey told the Scottish Chambers of Commerce on Tuesday that there’s “lots of issues” with using negative interest rates as a policy tool.
  • The eurozone industrial production was higher than expected in November, driven by a rebound in the output of intermediate and capital goods.
  • Italy’s government is on the verge of collapse after a junior coalition partner pulled out in the middle of the administration’s battle against the Covid-19 pandemic. Former premier Matteo Renzi said his party is quitting the coalition and attacked Prime Minister Giuseppe Conte for failing to do enough to tackle Italy’s problems. Renzi told reporters at a press conference in Rome that he considered it an act of “courage” to withdraw at such a time and said the country must do more to tackle problems from education to infrastructure as well as the coronavirus.
  • European Central Bank President Christine Lagarde pushed back on Wednesday against economic pessimism, arguing that a rebound will come as pandemic uncertainty declines and that Europe possesses all the tools needed to overcome the crisis. With much of the 19-member euro area in lockdown, Lagarde continued to predict a recovery, provided that economic restrictions can be lifted from the second quarter and the bloc can overcome a “laborious” start to vaccinations.
  • Japan’s core private-sector machinery orders rose 1.5 percent in November from the previous month for the second straight month of increase, government data showed Thursday, but the outlook remains uncertain amid the economic fallout from a resurgence of the novel coronavirus. Following a 17.1 percent expansion in October, the orders, which exclude those for ships and from electricity utilities due to their volatility, totaled 854.83 billion yen ($8.2 billion), according to the Cabinet Office. Machinery orders are seen as a leading indicator of capital spending.

In early trade on Thursday, the euro has slipped against the US dollar to trade at $1.2166, while it has weakened against the British pound to trade at GBP0.9005.