August 03, 2021
Market News 3 August 2021
What we know
Much like a shuttlecock, the Rand often follows a parabolic trajectory before coming crashing back down to reality again. The Rand too, is more than capable of raising its participant’s heart rates to unearthly levels as events unfold, though the Rand has far more interested spectators when compared to the sport of badminton – which I am convinced ceases to exist outside of the Olympics and only re-emerges every 4 years, or 5 on this occasion…
After a bout of poor form and a somewhat knee-jerk response to the civil unrest, the Rand has recuperated and managed to find some breathing room, finally able to consolidate below the R14.50/USD level. The latest retracement has found the Rand retesting some key support closer to R14.30/USD – this after US manufacturing failed to captivate the market alongside the reintroduction of stimulus package talks, with another half a trillion dollars of support on the cards. Sustained growth is being hampered by supply shortages across the US as well as bottlenecks in the supply chain as business struggle to ramp up production effectively.
Locally, the ANC and the EFF are at loggerheads over their proposed amendment to section 25 of the constitution to allow for land expropriation without compensation and cannot agree who should ultimately own any re-appropriated assets. The ANC’s hesitation to nationalise land is all but a small respite given the EFF’s persistent push have the state ownership of all assets. It is a slow process, but one that international investors will continue to watch very closely.
What others say
Reuters – Fed says economic recovery remains on track despite COVID-19 surge
The U.S. economic recovery is still on track despite a rise in coronavirus infections, the Federal Reserve said on Wednesday in a new policy statement that remained upbeat and flagged ongoing talks around the eventual withdrawal of monetary policy support.
Times Live – Covid-19 cases on the rise in Western Cape and KZN, as Gauteng cases decline
Figures from the National Institute for Communicable Diseases (NICD) showed that while new cases were declining in many provinces — most noticeably in Gauteng — the trend was significantly upwards in the two coastal provinces.
Reuters – Twitter partners with AP, Reuters to battle misinformation on its site
Twitter Inc (TWTR.N) will partner with the Associated Press and Reuters to more quickly provide credible information on the social networking site as part of an effort to fight the spread of misinformation, it said on Monday.
IB Times – IMF officially approves increased lending capacity
The board of governors of the International Monetary Fund on Monday greenlit increasing the institution’s lending capacity by $650 billion, the last step in approving an initiative to boost aid to the most vulnerable countries.
What we think
Last week we said that “Financial markets have swung from one direction to another in the last few weeks as investors try to assess what the surging Delta variant means for the world economy. Domestically, now that the dust has settled after the civil unrest, questions still linger about what lessons should be learnt from recent events.”
South Africa’s vaccination drive continues to build up a head of steam; progress has been slow but steady and we are now averaging 220,000 vaccinations per day. The risks of the delta variant’s rapid spread domestically, weighed up against the positive vaccination drive, seems to have local traders unsure about where we are heading next. During times like these is when we find the Rand moving drastically on the back of normally inconsequential news, though the market seemed rather unperturbed by our unimpressive PMI print on Monday and was carried stronger by our continued trade surplus.
The most notable news comes out of the US later this week with their balance of trade on Thursday as well as non-farm payrolls and the unemployment rate out on Friday. Locally the most prominent news comes on Friday as we await the change in our foreign exchange reserves.
Our range for the week: R14.20 – R14.50.
Have a great week!