The rand weakened early on Monday morning after the country was moved to an adjusted level 4 lockdown for 14 days. President Cyril Ramaphosa has indicated that the rising rate of infections calls for firmer lockdown measures. With daily Covid-19 infections doubling in the last two weeks, Ramaphosa announced stricter lockdown rules that will have a negative impact on the alcohol and hospitality industries. This will most likely keep the rand under pressure in the coming months as a third Covid-19 wave runs across the country. Government bonds also weakened, with the yield on the instrument due in 2030 rising 4.5 basis points to 9.035%.
Despite holding up fairly well in the markets last week, the rand started this week on the back foot. The ZAR lost ground against the pound, as the GBP/ZAR pair crept up to R19.80, gaining 1.05% since opening at R19.62 on Monday. The rand is currently trading at the 14.30 resistance level against the dollar. This equates to a similar gain of approximately 1.08% for the USD/ZAR pair.
The Euro made similar gains against the rand as the EUR/ZAR pair rose by 0.99%, from an open of R16.88 yesterday, and is currently trading around the R17.04 mark.
In the developed markets, the USD edged back and forth, coming from a strong momentum to lose steam against the pound during last week’s trade. The dollar strengthened once again as the markets opened on Monday. After climbing up from 1.3810, and touching the 1.40 resistance level, the GBP/USD pair fell back down and closed the week around the GBP/USD 1.3875 mark.
Over in the UK, the Bank of England (BoE) maintained its decision to keep interest rates at the ultra-low level of 0.1%, with 8/9 votes to hold the bond-buying programme at £865 billion. Despite there being no changes to BoE’s current use of their monetary toolkit, the pound softened upon the BoE’s interest rate announcement. The surprisingly dovish stance on monetary policy led to Sterling headwinds and GBP pairs took a mid-week hit.
This past week saw a return of Euro volatility as fears of higher inflation played off against continued support for economic stimulus by the ECB and the resultant economic activity growth. Overall, the Euro ended the week stronger amid record increases in economic activity. Positive PMI figures, coupled with a record-high consumer confidence reading, illustrated a significant growth in economic activity as lockdown measures are relaxed across the Eurozone.
Along with other emerging markets, the rand will have an uphill battle this week, as many developed countries are due to release economic data that will influence the path forward for the rand, amidst rising Covid-19 infections, a sluggish vaccination roll-out, and struggling economic recovery.
WEEKLY MARKET EVENTS
WEDNESDAY 30 JUNE 2021
UK: Current account (Q1)
UK: GDP growth rate (Q1)
EA: Inflation rate (June)
SA: Balance of trade (May)
THURSDAY 1 JULY 2021
EA: Unemployment rate (May)
SA: ABSA manufacturing PMI (June)
FRIDAY 2 JULY 2021
USA: Nonfarm payrolls (June)
USA: Unemployment rate (June)
USA: Balance of trade (May)
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