LOCKDOWN LEVEL 1 Ver3 [ DAY 37]  

TOTAL DAYS 406 – 7 HOURS 40 MINUTES

Vaccine rollout day 93 / J & J VACCINE DAY 81

By the close of trade on Wednesday 5th May 2021, the South African rand strengthened against the US dollar. The factional battles ramped up a gear late yesterday with the Suspension of Ace Magashule, who was issued a letter of suspension by his deputy Jessie Duarte.  Ace immediately fired back a letter summarily suspending ANC Chairman Cyril Ramaphosa.  This is developing story and this weekends NEC meeting should produce fireworks [excuse the pun].

  • When Treasury Secretary Janet Yellen speaks, investors listen. And on Tuesday, they didn’t like what they heard. At an event hosted by The Atlantic, Yellen, an economist who previously led the Federal Reserve, indicated that the central bank may need to hike interest rates to prevent prices from rising too quickly. “It may be that interest rates will have to rise somewhat to make sure that our economy doesn’t overheat,” Yellen said. Her comments rippled through markets, feeding a selloff in tech stocks that could take a beating when rates rise.
  • The Chicago Federal Reserve (Fed) Bank President, Charles Evans reiterated his worries about reaching the Fed’s 2.0% inflation goal and stated that he expects monetary policy to stay super-easy for some time. Meanwhile, the Fed Bank of Cleveland President, Loretta Mester stated that broad-based recovery is taking more time to achieve, and more progress will be needed in the job market before the Fed’s conditions for reducing its extensive support will be met.
  • On the data front, US services industry activity grew at a slightly slower pace in April, likely restrained by shortages of inputs amid a burst of demand that is being driven by massive fiscal stimulus and a rapidly improving public health environment.  Rents are soaring in many U.S. cities as the economy rebounds, squeezing the budgets of tenants who also face increased risk of eviction after courts overturned a pandemic-era ban. There’s no single indicator that captures a complex national picture, as Covid-19 drove major shifts in where people live and work. Still, data points to tight markets in much of the country. The median monthly charge on a vacant rental jumped by $185 in March from a year earlier, according to the U.S. Census Bureau.
  • The share of US dollar reserves held by central banks fell to 59 percent—its lowest level in 25 years—during the fourth quarter of 2020, according to the IMF’s Currency Composition of Official Foreign Exchange Reserves (COFER) survey. Some analysts say this partly reflects the declining role of the US dollar in the global economy, in the face of competition from other currencies used by central banks for international transactions. If the shifts in central bank reserves are large enough, they can affect currency and bond markets.
  • The Group of Seven countries on Wednesday stepped up pressure on China during their three-day foreign ministerial talks in London, urging Beijing to address concerns over its alleged human rights abuses and tensions in the Taiwan Strait. Calling China a “major power and economy with advanced technological capability,” the G-7 foreign ministers called on Beijing in their communique to “assume and fulfil obligations and responsibilities commensurate with its global economic role.”  China State Planner to Suspend Indefinitely all activities under the China-Australia Strategic Economic Dialogue Mechanism.

The yield on benchmark government bonds mostly rose yesterday. The yield on 2026 bond rose to 7.33%. Further, the yield on 2023 bond advanced to 4.66%, while that for the longer-dated 2030 issue fell to 9.13%.

In early trade on Thursday, the US dollar is trading marginally lower against the South African rand at R14.3682, while the euro is trading lower at R17.2462.  The British pound has declined against the South African rand to trade at R19.9622.

By the close of trade on Wednesday 5th April 2021, the euro declined against most of the major currencies.

  • Next to Friday’s non-farm payrolls report, tomorrow’s Bank of England monetary policy announcement is the second most important event of the week. Like the Reserve Bank of Australia, the BoE is widely expected to leave policy unchanged. There is only a small chance of tapering but there’s a very high chance of upgraded economic projections. The BoE has a lot to be optimistic about. They are leading the developed world in vaccinations with more than half of their population receiving at least one dose of the COVID-19 shot. New daily virus cases have fallen below 2,000 which is a dramatic improvement.
  • Bank of Japan (BOJ) policymakers agreed on the need to focus on keeping interest rates stably low while the economy remains under the strain caused by the COVID-19 pandemic, minutes of the central bank’s March meeting showed on Thursday. With state-of-emergency curbs to contain the pandemic hurting consumption and keeping deflation risks alive, the nine board members agreed there was “extremely high uncertainty” over the outlook, according to the minutes. One member said the risk of deflation was still bigger than that of inflation for Japan, as wages and inflation expectations remain on a weak note.
  • The eurozone producer price index (PPI) accelerated in line with expectations in March, driven by increases for energy and intermediate goods, reinforcing forecasts of higher consumer inflation in the coming months.
  • Eurozone business activity accelerated in March, as the bloc’s dominant services industry shrugged off renewed lockdowns and returned to growth.
  • Restrictions to contain a third wave of coronavirus infections halted a recovery in Germany’s services sector in April, as Europe’s largest economy struggles to leave the COVID-19 crisis behind.

In early trade on Thursday, the euro marginally slipped against the US dollar to trade at $1.1956, while it has marginally gained against the British pound to trade at GBP0.8722.