MARKET NEWS 06/08/2020

Good morning

While the trade off between stemming the virus spread versus decimating the economy will be debated for years it is clear that our COVID strategy is at least doing what is supposed to on the virus front. A quick look at our daily chart shows a clear decline in the infection rate with a peak of 13 994 on the 24th of July which has dropped to 8 559 yesterday.  

These are the mid rates as at 8:30 today:

USD = R17.32

AUD = R12.48

GBP = R22.78

DXY = 92.63

EUR = R20.60

Brent Crude = $45.27 per barrel

Market News

• The Rand took a breather yesterday after absorbing a few body blows over Monday and Tuesday. We opened the day at R17.35 to the Dollar and despite making a short lived move to R17.18 we spent most of the day in the R17.30’s and find ourselves at R17.33 this morning.  
• Trying to make an accurate prediction in the currency game is fraught with danger but that doesn’t stop the big financial news outlets giving it a go anyway. Reuters has just run a poll across 62 currency strategists with consensus showing that while emerging market currencies have made admiral inroads from their peak COVID lows they are still expected to post gains against the Dollar over the coming 12 months, although the average view of 3% in further gains is not that exciting. The poll predicts that while emerging markets will strengthen, most will struggle to recoup even half of their losses against the Dollar, and with the Rand having dropped 38% to the 6th of April but only recovering 10% thus far perhaps this poll is more accurate than most.  
• Given the importance of a sustained economic rebound in the US, and how that would calm fears around emerging markets as a whole, the US got a three day run of jobs data off to a bad start yesterday. Their private payrolls for July came in well below expectations at 167 000 new jobs versus the 1.2m forecast, and this will focus the market’s attention on their initial weekly jobless claims today followed by non-farm payrolls for July tomorrow. The big private sector miss rocked the Dollar as the Dollar Index dropped to a 2 year low of 92.53 but unfortunately this slide did not translate into any meaningful strengthening in the Rand.
• The continued deadlock in US negotiations around their COVID relief funding has also left the currency market looking for direction. Expectations are that a deal will be reached before weekly cheques are due to go out tomorrow (let’s not dwell on the fact the leader of the Western World still uses cheques!!!) but as yet there seems no compromise between the opposing parties. One would have expected nervous jitters to sweep through the market by now but investors are clinging to Republican Senator Roy Blunt’s comments that “if there’s not a deal by Friday there won’t be a deal” as a signal that something will be done. The Rand will hopefully react positively when a deal is announced.  
• The local front has been very quiet this week although various government officials including Cyril Ramaphosa condemning the looting of COVID relief funds could be seen as a positive, but only if something is actually done about the corruption. On a more positive note BusinessDay is running an article looking at our mineral exports over June which exceeded the previous 12 months in value despite the sector still operating below capacity. Record high gold and platinum prices offset the drop in tonnage across bulk commodities like iron ore and coal, and the real positive from the article is that there seems sufficient international demand to purchase what ever we can dig out of the ground. This should help sustain our recent trade balance surplus which would be Rand positive.  
• While not directly Rand related renowned CNBC analyst Jim Cramer delivered a very bullish assessment yesterday saying his “Go List” of traditional US equities not linked to the COVID trade all turned green yesterday which suggests that money managers are betting on a vaccine coming soon, and the market returning to near normal within a year. If this is the case that will have a positive impact on the Rand down the line.  
• No local market data today.  
• Possible USD mid rate trading ranges in the Rand today are R17.15 and R17.45.