Not a lot has changed from yesterday afternoon in the Rand sphere, with the Rand still trading on the back foot, along with other EM currencies. The Rand is hovering around the R16.60 level and judging by trading this morning the bias is for the Rand to move weaker as the tug-o-war between “risk-on” and “risk-off” is currently on the “risk-off” side due to the surge in COVID cases.
Commodities have started the day off rather in a muted fashion with Palladium still the only metal under the cosh. After suffering a 5% decline yesterday, Palladium is currently 1.1% down and trading at $ 2132 per ounce Gold and Platinum are stable trading at its opening levels of $ 1960 and $ 924 per ounce, respectively. Brent Crude is also flat at $43 per barrel. “Risk-off” could also impact the metals negatively except Gold as Gold could surge more in such a scenario due to its safe-haven status.
The big event overnight was the US Fed and their interest rate decision. In a unanimous decision, the Fed voted to keep rates unchanged and will keep it low until employment recovers and inflation picks up. As expected, Chairman Powell reiterated the Fed’s stance of doing anything in its power to support the US economy to recover as quickly as possible. This is a thinly-veiled reassurance that more stimulus is on its way, especially in light of economists predicting that the US GDP sank a record 35% in the second quarter. The natural conclusion drawn from the speech is that the US and World economy directly linked is to the course of the COVID pandemic. The initial reaction from the US dollar during the speech was to touch the 1.1800 level before recovering and settle in the mid 1.1760’s for the remainder of the trading session. It will be interesting to see the developments in the US dollar today and whether the EM’s latch onto the US dollar or continue with their decoupling that we have witnessed over the past couple of days.
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