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Daily Dose

Daily Dose

Good Morning,

On the wires…

  • Yuan-rouble trading surges more than 1,000% as China and Russia draw closer together to counter the US
  • China sends 30 jets into Taiwan’s defence zone in the second largest incursion this year
  • Boris Johnson denies breaking ministerial code of conduct as backlash continues
  • Cybercriminals in ‘concerted effort’ to target SA’s critical infrastructure
  • Businessman appears in court in connection with R28m tax fraud
  • Johnson joins SA’s Oosthuizen, Schwartzel in $25m field for Saudi-backed LIV Golf opener

Quote of the day…

“I hit the wall, but I’m still going” – Lance Stroll

The indicators…

Currency crackdown…

U.S. Treasury yields continued to climb throughout yesterday, as the U.S. dollar strengthened across the board with President Biden maintaining a “laser focus on addressing inflation”. These worries over a further acceleration in global inflation depressed investors’ risk appetite. The rand was forced to give up around 15 cents to the dollar yesterday with the dollar, as always, being supported by demand for safe havens.

Similarly, soaring eurozone inflation reached a record-high 8.1% in May, yesterday’s figures showed, stoking concern about rate rises not just in Europe but globally. This impacted the EUR/ZAR pairing, which has opened 9 cents higher this morning. Looking to the EUR/USD, the dollar managed to strengthen by around 0.20% against the euro. The more the markets focus on the inflation data and central bank action, the more likely it is that we endure a shaky start to June in terms of risk sentiment – and therefore a strong one for the dollar. Fed members are also due to speak today – potentially giving us some further clues on the outlook. Despite this, the euro could still very well be in for a future boost, as pressure builds on the ECB to take its most aggressive stance on rate hikes in its history.

U.S. stocks fell on Tuesday as soaring oil prices and hawkish comments from U.S. Fed officials spooked investors – the S&P500, NASDAQ and Dow Jones all dropped half a percent. However, our South African top 40 inched up 0.15% – continuing its recent resurgence over the past week. SA’s stock market strength is most likely due to the fall in unemployment figures yesterday (Quarterly figure of 34.5%), as well as the acceleration in private sector credit growth. Data on Tuesday also showed South Africa recorded a trade surplus of 15.49 billion rand in April, down from a revised surplus of 47.20 billion rand in March.

As we prepare to absorb a major petrol price hike today, we look to oil news with angst. The SA government have continued to provide us with some relief, with the National Treasury announcing yesterday that it will extend the fuel levy reduction. This will cost an estimated at 4.5 billion rand in foregone revenue, which our Treasury is confident will be absorbed through fiscal discipline. Fortunately, some Gulf members are rumoured to have begun planning for an increase in output which would help quell this oil balloon. The anticipation of more supply hitting the market, even after cutting Russia out, could be fuelling some of this sell-off as oil gave up its post-EU embargo bounce to reach $119 – after reaching worrying highs of $123 per barrel yesterday.

On the radar…

  • All – Russia/Ukraine Crisis
  • All – Covid 5th Wave
  • EU – German Manufacturing PMI
  • EU – European Manufacturing PMI
  • UK – UK Manufacturing PMI
  • EU – Unemployment Rate
  • EU – ECB President Lagarde Speaks         
  • SA – Total Vehicle Sales
  • US – ISM Manufacturing PMI
  • US – JOLTs Job Openings
  • EU – ECB Members Panetta & Lane Speaks
  • US – Fed Members Williams & Bullard Speak

Did you know?

The last time all living humans were on Earth together was November 2nd, 2000. The International Space Station has been continuously occupied ever since.

All the best,

Kyle 

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