MARKET NEWS 08/06/2020

Good morning

Supply and demand drives market pricing so the our gold miners are hoping that enthusiastic undersea miners run into many difficulties when perfecting their unmanned excavation vehicles. An article doing the rounds estimates that gold deposits across the sea bed stand at a whopping $150 trillion which would surely move market pricing if all that gold flooded the market!! 

These are the mid rates as at 7:30 today:

USD = R16.79

AUD = R11.70

GBP = R21.33

NZD = R10.94

EUR = R18.95

Brent Crude = $42.36 per barrel

Market News

• Luckily for the Rand there are no apparent threats from the deep as we continue our march stronger this morning. Last week saw impressive gains as we opened last Monday at R17.44 to the Dollar and closed for the week at R16.85, and we have already made a run to R16.74 in early trade this morning before pulling back to R16.79.
• Friday afternoon was a classic case of bad news becoming good news because it wasn’t actually as bad as the market had predicted. The monthly US employment data was forecast to deliver 8.5 million job losses over May and an unemployment rate ballooning to 20%, a post World War 2 record. So it was a big surprise when 2.5 million new jobs were created with an improvement in unemployment from 14.7% to 13.3% which is still close to record highs but much better than 20%. Unfortunately for the Rand the market’s reaction favoured the Dollar as an uptick in US economic activity suggests an increase in their bond yields which would increase demand for Dollars.
• But after initial Dollar support the upbeat US jobs data has since turned positive for the Rand as improved sentiment around the US recovery should lessen the Dollar’s attractiveness as a safe haven asset. The Rand has posted a 3 week winning streak against the Dollar and this trend should remain in place as global economies start coming back to life with a “V” shaped recovery starting to look more likely than thought only a few weeks ago.  
• The following is from Reuters:  The US Dollar fell against emerging market currencies and the British Pound after surprising improvement in US labour market data bolstered expectations for economic recovery, which reduced safe-harbour demand for the greenback. Sentiment has improved dramatically in the currency market as traders focus on signs of a rebound from the coronavirus outbreak as economies reopen from lockdowns, which has hurt the Dollar and driven money into so-called risk-on trades. “Commodities and emerging market currencies are clearly finding it easier to rise against the Dollar on hopes of economic recovery,” said Junichi Ishikawa, senior foreign exchange strategist at IG Securities in Tokyo.
• With the Rand also being a commodity linked currency we would have found support this morning from OPEC+ agreeing over the weekend to extend their 10% production cut for a third month to the end of July. Brent crude has jumped this morning to $42.36 per barrel and the Rand will have been pulled up with this move.  
• Its not all international factors driving the Rand as renewed foreign flows into our government bonds has seen demand for the Rand push us stronger. After a record selloff of R69bn in and around our junk rating we have now seen net inflows of R4bn over the past 2 weeks, and with bond yields in developed markets likely to stay very low for a long time to come our higher yielding bonds should remain attractive for the foreseeable future.  
• The following is from MoneyWeb:  After selling a record R69.6 billion of South Africa’s recently downgraded bonds this year, foreign investors – faced with low to zero returns around the world – are rushing back to grab the high-yielding debt in the ailing economy. This week Goldman Sachs said it was sticking to a “buy” recommendation on South Africa’s 10-year issue. Deutsche Bank and Bank of America also recommend the South African debt, with Deutsche Bank saying it preferred long-dated bonds due in 2035 and 2037.
• No local market data today.  
• Possible USD mid rate trading ranges in the Rand today are R16.60 and R17.00.