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

  • It’s a big week for the financial markets. On Tuesday the Congressional hearings for Janet Yellen’s confirmation as Treasury secretary began (there’s no guidance on how fast the panel will vote on her nomination) and today [Wednesday 20th January 2021], Joe Biden will be sworn in as the 46th President of the United States. This is only the second time in US history that the outgoing President and his family will not attend thew inauguration.  There are 3 central bank monetary policy announcements, PMI reports from countries around the world and Australia’s labor market report. With less than 8 hours to go before Trump leaves office, investors are optimistic. The rally in equities and currencies shows little concern about violence and punishing policies. South of Americas borders the Caravans have been temporarily halted after violent clashes with local Government forces.  Biden has stated in his election campaign that under his administration he will welcome 11 million new Americans.
  • Meanwhile Janet Yellen, President-elect Joe Biden’s choice for Treasury secretary, testified Tuesday that the U.S. could afford a higher corporate tax rate if it coordinates with other economies around the globe. “We look forward to actively working with other countries through the [Organization for Economic Cooperation and Development] negotiations on taxes on multinational corporations to try to stop what has been a destructive, global race to the bottom on corporate taxation,” she said in response to a question from Sen. Mike Crapo, R-Idaho.
  • This amid optimism that the incoming administration of US President-elect, Joe Biden will move comprehensively to support the US and the world through the ongoing Covid-19 pandemic.
  • Top officials in Canada want a chance to make the case for a long disputed oil pipeline to be built amid reports President-elect Joe Biden will cancel Keystone XL. Alberta Premier Jason Kenney said Monday he will seek legal damages if reports are true that Biden plans to scrap the pipeline on his first day upon taking office. Biden’s plan is outlined in transition documents seen by Canadian media outlets. “We hope President-elect Biden will show respect for Canada and will sit down and at the very least talk to us,” Kenney said. Biden spokesman Andrew Bates said Monday the transition team had no comment.
  • On Tuesday, U.S. Treasury Secretary Steven T. Mnuchin announced that the U.S. Department of the Treasury approved more than $12 billion in payroll support for major passenger air carriers to support airline industry workers. Subtitle A of Title IV of Division N of the Consolidated Appropriations Act, 2021 (the PSP Extension Law) provides for up to $16 billion in payroll support for American workers employed by passenger air carriers and contractors (PSP2). Treasury concluded PSP2 agreements with Alaska Airlines, Allegiant Air, American Airlines, Delta Air Lines, Frontier Airlines, Hawaiian Airlines, JetBlue Airways.
  • The yield on benchmark government bonds fell yesterday. The yield on 2026 bond fell to 6.58%. Further, the yield on 2023 bond declined to 4.45%, while that for the longer-dated 2030 issue fell to 8.75%.

In early trade on Wednesday, the US dollar is trading lower against the South African rand at R14.9502, while the euro is trading lower at R18.1566.   The British pound has declined against the South African rand to trade at R20.4026.

By the close of trade on Tuesday, the euro advanced against most of the major currencies.

  • The BoJ is expected to take no action when it concludes its meeting early on Thursday, despite an escalating COVID-19 outbreak and a deflationary storm hitting Japan. In fact, some reports suggest the BoJ is considering scaling back some of its ultra-aggressive policies, but admittedly, this is not the time to be discussing an exit. As for the yen, its fate hangs on how global bond yields and risk sentiment develop, so US stimulus news may be the most crucial element. In contrast to most nations, Japan never entered a full-on lockdown.
  • The British pound has posted slight gains in the Tuesday session. Currently, GBP/USD is trading at up on the day. It has been a quiet start to the week for the British pound. US banks and stock markets were closed on Monday for a national holiday, and the Tuesday data calendar is very light, with no UK data releases and just one minor event in the US. This sets the scene for Wednesday, which could see stronger movement from GBP/USD. The UK will release a host of inflation indicators, highlighted by headline CPI. The index is projected to improve to 0.5% in December, up from 0.3% beforehand.
  • Investor sentiment in Germany rose in January, on improved expectations for exports, thus boosting the outlook for Europe’s largest economy.
  • A separate gauge of current conditions also edged up in January. Meanwhile, German consumer price index declined further on an annual basis in December.

In early trade on Wednesday, the euro has advanced against the US dollar to trade at $1.2143, while it has marginally weakened against the British pound to trade at GBP0.8896.