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Daily Dose

21 May 2019

Good Morning,

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On the wires

International:

  • US eases some restrictions on China’s Huawei
  • Formula 1 legend Niki Lauda dies
  • Trump loses lawsuit challenging subpoena for financial records
  • North Koreans being sold by the thousands in China, report claims
  • Pilot and passenger die after floatplane crashes in Alaska

Local:

  • Former SA Air Force Lieutenant General Dennis Earp dies at 88
  • Zuma puts his faith in 'sharp legal team'
  • Hijacked cab driver accuses cops of assault
  • JB Marks municipality (Ekurhuleni) to vote again in by-elections
  • Semenya to race 3 000m event in California

Two Cents Worth

Currency Crackdown

The rand looks to have finally stabilised following last week’s sharp slide as the sell-off in global risk assets slowed, with investors/ traders taking a step back as they look to navigate an action packed week (particularly on the data front).  The rand lost 2% of its value last week but was still one of the better performing emerging market currencies, with the post-election positivity limiting losses ahead of this week’s unveiling of a new cabinet. Yesterday, the rand opened around 14.43/$ and strengthened to a close of 14.38 (even temporarily reaching a low of 14.34/$) as the dollar dipped across the board and as reports circulated that Tito Mboweni would be kept on as Finance Minister for at least another year when the cabinet is announced. This underscored the market’s value in the stability of the Finance Ministry after the excessive changes seen under the Zuma administration. The rand is currently trading at 14.44/$ this morning after the dollar recorded some overnight gains.

Overnight trading pushed the dollar near a two-and-a-half week high, with higher US Treasury yields and safe-haven buying on growing worries that trade tensions between the US and China could worsen despite the US granting Huawei a temporary reprieve on trade restrictions imposed last week. Meanwhile Treasury yields got a lift after comments from Jerome Powell eased expectations that the Fed could cut interest rates this year. The Fed Chair said that it was “premature” to determine the impact of trade tensions and tariffs on the trajectory of monetary policy and indicated that recent economic data pointed towards a healthy supply side. The euro was flat ahead of the European election this weekend, while the pound held near a four-month low as UK PM Theresa May struggles to pull a Brexit deal together.

Elsewhere: US stocks closed mostly lower overnight in risk-off trade, while Asian stocks came off four-week lows this morning after the US issued Huawei with a temporary license to retain support for its existing products. Meanwhile oil prices held at elevated levels as OPEC indicated it was likely to maintain production cuts while escalating Middle East tensions provided further support. Gold is marginally weaker on the back of a stronger dollar.

What to look out for today?

  • EU- Fed member Bostic Speech
  • US- Fed member Evans Speech
  • US- Home Sales
  • EU- Consumer Confidence
  • EU- ECB member Hakkarainen Speech
  • EU- ECB member Guindos Speech

Did you know?

When it gets too hot in Australia, the nectar in certain flowers will ferment and turn into alcohol.

The bees that get "drunk" from the nectar aren't allowed back into the hive until they sober up.

Have a great day,

Nyiko

 

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