Vaccine rollout day 118 / J & J VACCINE DAY 114 [Phase 2]

By the close of trade on Wednesday 2nd June 2021, the South African rand strengthened against the US dollar.   South Africa experienced the first serious bite of the 2021 Winter season.

  • Investors cheered the latest evidence of a sustained rebound in global economies and as US Treasury yields pulled back.  The Fed announced late Wednesday that it will unwind one of the most iconic bailout facilities of the Pandemic era, namely its holdings of corporate bonds, junk bonds, bond ETFs, and junk bond ETFs that it had purchased last year. The Fed said it will outright sell them. The Fed’s tersely worded statement said that the bond and ETF sales “will be gradual and orderly, and will aim to minimize the potential for any adverse impact on market functioning by taking into account daily liquidity and trading conditions for exchange traded funds and corporate bonds.”
  • The FEDS Beige Book – The national economy expanded at a moderate pace from early April to late May, a somewhat faster rate than the prior reporting period. Several Districts cited the positive effects on the economy of increased vaccination rates and relaxed social distancing measures, while they also noted the adverse impacts of supply chain disruptions. The effects of expanded vaccination rates were perhaps most notable in consumer spending in which increases in leisure travel and restaurant spending augmented ongoing strength in other spending categories.
  • China will hand out 40 million renminbi ($6.2 million) of its digital currency to citizens in Beijing in a lottery. Residents of the Chinese capital can use two banking apps to apply to win one of 200,000 so-called red packets as part of the lottery, according to the Beijing Local Financial Supervision and Administration Bureau. Each envelope contains 200 yuan (about $31) of the digital currency which can be spent with selected merchants. The deadline to register is midnight on June 7. The world’s second largest economy has yet to do a nationwide rollout of the digital yuan, which it has been developing since 2014
  • The yield on benchmark government bonds mostly fell yesterday. The yield on 2026 bond rose to 7.33%. Further, the yield on 2023 bond declined to 4.95%, while that for the longer-dated 2030 issue fell to 8.87%.

In early trade on Thursday, the US dollar is trading marginally lower against the South African rand at R13.5226, while the euro is trading lower at R16.4962.   The British pound has marginally declined against the South African rand to trade at R19.1526.

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

  • The European Central Bank will not change the total size of its asset purchase programme at its June 10 meeting but will start tapering its pandemic purchases later this year, according to a Reuters poll which also showed inflation risks to the upside. With an economic recovery underway and price pressures rising, calls for winding down the emergency purchases have increased in recent weeks. But several ECB members have said a decision to reduce purchases at the June 10 policy meeting was unlikely.
  • German retail sales fell much more than expected in April, as further Covid-19 restrictions were introduced.
  • The eurozone’s producer price index (PPI) rose more than expected in April, boosted by a surge in energy prices.
  • The U.S. Federal Reserve’s recent commitment to keep interest rates low despite creeping inflation has created new headaches for the Bank of Japan, which is trying to quietly wean the economy off its massive stimulus. The Fed in August reframed its objectives amid the pandemic recovery, allowing consumer prices to rise faster than would have been tolerated by the U.S. central bank in previous cycles. While the BOJ, a pioneer of quantitative easing, has maintained extremely accommodative settings for decades, its operations are still guided to a large extent by how Fed policy affects global interest rates.
  • German Bundesbank President, Jens Weidmann opened the door to buying fewer bonds from polluting companies under the ECB’s stimulus programs, dropping his opposition to taking such an active role in the fight against climate change.

In early trade on Thursday 3rd June 2021, the euro slipped against the US dollar to trade at $1.2262, while it has marginally weakened against the British pound to trade at GBP0.8632.