Vaccine rollout day 163

New cases 16435

By the close of trade on Thursday 15th July 2021, the South African rand weakened against the US dollar. We head towards the close of the week having both Gauteng and KZN go up in flames as violent riots and arson brought the Provinces to its knees.  The riots were reminiscent of those riots that happened in 1949 and the 80’s and 90’s.  This time the riots took on a more targeted nature of destroying food and fuel supplies crippling business and placing food security at risk.  Communities rallied and as political plots came to the fore the flames have for now subsided.  The Rand however took a beating.

  • In SA, labour markets demand for basic income grants amid the ongoing unrest in the country and businesses calls for cash flow assistance from the government.
  • Food, fuel and other critical aid bound for KwaZulu-Natal will be transported in armed police convoys, after days of unrest shattered supply chains and left the province with a dwindling supply of essential goods.
  • Shoppers flocked to stores that had not fallen prey to unrest and rampant looting, with some lining up from as early as 03:00 waiting for up to eight hours to get basic groceries that were being strictly rationed. The burgeoning food security crisis comes in the aftermath of an orchestrated campaign of disruption in the name of former president Jacob Zuma spiraled out of control.  Attacks on communities continued overnight in Durban and smaller towns in KwaZulu-Natal despite the commencement of mop-up operations in parts of the province
  • In the US, Fed Chairman, Powell stated that the inflationary pressures will persists for some time before curbing, he added that the central bank will not rush to pare purchases of treasury and mortgage assets and said the economy is far away from its goal of “substantial further progress”. For a second day, Powell defended the central bank’s stance to keep providing support to the U.S. economy even as inflation runs at uncomfortable levels. “This is a shock going through the system associated with the reopening of the economy and it’s driven inflation well above 2%, and of course we’re not comfortable with that,” Powell told the Senate Banking Committee Thursday.
  • On the data front, Philadelphia Fed Manufacturing data fell as factories fight to keep up with demand amid supply bottlenecks and distressed shipping industry.
  • The number of people filing new claims for unemployment benefits fell to a 16-month low for the week ended 9 July, as the labour market gains traction. Industrial production rose in June amid continued increase in demand despite supply constraints particularly in automotive sector. The latest Consumer Price Index showed prices were up 5.4% compared to a year ago.
  • Fitch Ratings has raised its home price expectations for 2021 to reflect year-to-date developments in five countries including Australia, Canada and the US. Macroeconomic recoveries, the extension of government support measures and very low interest rates have driven home price growth in 1Q21
  • World GDP is forecast to rebound to positive growth of 5.8% in 2021 after a contraction of 3.5% in 2020. The rebound in economic growth in advanced economies such as the United States, the European Union, the United Kingdom and Canada combined with continued strong economic momentum in China are linked to the rapid rollout of vaccination programs and containment of domestic new COVID-19 cases during the first half of 2021. Growth momentum in the US, Eurozone and UK has been buoyant, with the IHS Markit PMIs for these nations having risen sharply in the second quarter of 2021.
  • The yield on benchmark government bonds fell yesterday. The yield on 2026 bond fell to 7.54%. Further, the yield on 2023 bond declined to 5.17% while that for the longer-dated 2030 issue fell to 8.94%.

In early trade on Friday 16th July 2021, the US dollar is trading marginally lower against the South African rand at R14.5786, while the euro is trading lower at R17.2132.  The British pound has gained against the South African rand to trade at R20.1632.

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

  • The Bank of England interest rate-setter, Michael Saunders, stated that modestly tighter monetary policy would help keeping the inflation rate around the target by putting an end to the bond purchase programme before its due date.
  • The UK employment rose in June with economy bouncing back from pandemic hit, the increase was driven by rise in accommodation and food jobs that had been affected badly due to lockdown restrictions.
  • Last week, the ECB unanimously approved an updated monetary policy strategy. Next week, Lagarde and her colleagues will decide if the changes to the strategy will prompt changes to the policies. She hints at forceful and persistent forward guidance. The strategy review was finalised and unanimously approved last week. It quickly summarises the formalisation of existing practices seasoned with an ambitious road map to up the battle against climate change.
  • According to a survey conducted by the credit-research firm Tokyo Shōkō Research, 34.2% of small and medium-sized enterprises with capital under ¥100 million reported that they had excessive debt, much higher than the 15.4% among large enterprises. Among those SMEs, 60% said that they had fallen into excessive debt after the outbreak of the pandemic.

In early trade on Friday 16th July 2021, the euro marginally slipped against the US dollar to trade at $1.1826, while it has weakened against the British pound to trade at GBP0.8546.

Be safe everyone.