Vaccine rollout day 161

New cases 12537

Single day deaths 633

By the close of trade on Tuesday 13th July 2021, the South African rand weakened against the US dollar.  Ongoing riots the likes of which has an intensity and focus never seen in the Democratic South Africa.  This has hurt investor sentiment, with several businesses suffering serious damage and others destroyed. The controversial former head of the State Security Agency’s (SSA) rogue special operations unit, Thulani Dlomo, has been identified as a prime suspect being investigated for fomenting violent unrest in KwaZulu-Natal following the arrest of former president Jacob Zuma.  Dlomo was a key person of interest in instigating the unrest that has rocked South Africa, led to the death of at least 45 citizens and destroyed businesses and jobs worth hundreds of millions of rands.

  • Government has announced that the National Prosecuting Authority will oppose bail for the more than 1 200 people arrested for public violence and economic sabotage. This is as violent looting persisted well into Tuesday evening in both Gauteng and KwaZulu-Natal.
  • Meanwhile, the World Bank suggests job creation as the only preserving macroeconomic stability available for South Africa as it expects its gross domestic product to slow down in 2023. In the US, the consumer price index (CPI) recorded its highest growth in 13 years last month, amid supply bottlenecks and recovery in travel services as a rebound in the domestic economy takes motion.
  • US core inflation sharply exceeded consensus expectations for the fourth month in a row.   Senate Democrats announced a top line budget number late Tuesday that will propel their plan to enact the full array of President Joe Biden’s social welfare and family aid promises without Republican votes. The proposal sets an overall limit of $3.5 trillion for the spate of Democratic policy ambitions that won’t make it into a bipartisan infrastructure deal, if Congress can reach one. Formal text of the Senate’s budget resolution has yet to be released.
  • Another hotter than expected US CPI print has got the market wondering whether the lift in inflation will prove to be transitory or more enduring. The Fed’s Kaplan said he has raised his inflation forecast for the remainder of the year and into 2022, while the Fed’s Daly falls into the transitory camp where Chair Powell is also. Markets have sided on the hawkish interpretation, bringing forward rate hike expectations to late 2022, meaning markets also likely see tapering occurring in late 2021 assuming a 12m tapering profile.
  • The yield on benchmark government bonds rose yesterday. The yield on 2026 bond rose to 7.56%. Further, the yield on 2023 bond advanced to 5.18%, while that for the longer-dated 2030 issue rose to 8.98%.

In early trade on Wednesday, the US dollar is trading higher against the South African rand at R14.7422, while the euro is trading higher at R17.3678.  The British pound has gained against the South African rand to trade at R20.3722.

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

  • The Bank of England’s (BoE) Financial Stability Report alleged that crypto-assets are highly speculative and more interlinked with big investors with limited exposure to institutional investors, adding that the price volatility highlights “potential pockets of exuberance”. The BoE Governor, Andrew Bailey warned investors of crypto assets being of no intrinsic value.
  • An electronic equivalent of banknotes and coins, the digital euro will likely be a digital wallet that euro zone citizens can keep at the ECB. It is part of a drive by central banks to meet growing demand for electronic means of payment and tackle a boom in private sector digital currencies from Bitcoin to Facebook’s proposed Diem.
  • Asian stock markets are trading in the red on Wednesday, following the broadly negative cues overnight from Wall Street, after data showed U.S. consumer inflation surprisingly accelerated at the fastest pace in thirteen years in June. Traders also remain concerned amid the accelerating infection rates of the highly contagious delta variant of the coronavirus in several parts of the world over the last few weeks. They also await cues from a slew of central bank decisions due this week.
  • EU economic and finance ministers today adopted the first batch of Council implementing decisions on the approval of national recovery and resilience plans. Austria, Belgium, Denmark, France, Germany, Greece, Italy, Latvia, Luxembourg, Portugal, Slovakia and Spain got the green light for the use of EU recovery and resilience funds to boost their economies and recover from the COVID-19 fallout. The adoption of Council implementing decisions on the approval of the plans permits the member states to sign grant and loan agreements that will allow for up to 13% pre-financing.
  • Prime Minister Yoshihide Suga apologized Wednesday for his administration’s controversial request that drinks wholesalers stop supplying liquor to restaurants and bars that have defied an alcohol sales ban aimed at curbing the spread of the coronavirus. “I offer my apologies for causing trouble to many people,” Suga told reporters a day after the government withdrew last week’s request that wholesalers stop supplying establishments in areas under the COVID-19 state of emergency that have continued serving alcohol.

In early trade on Wednesday, the US dollar is trading higher against the South African rand at R14.7378, while the euro is trading higher at R17.3622.  The British pound has gained against the South African rand to trade at R20.3726.