Market Update & July 21st Macro Drivers

Market Update

Global equity markets are bullish today after a rescue package has been agreed by the European Union to help struggling countries deal with the debt burden caused by the Covid-19 pandemic.

Southern countries across Europe were desperate for European grants to help keep workers on their furlough payment schemes to prevent their economies from collapse altogether.

Markets are confident that because of these drastic monetary and fiscal measures implemented in the early stages of the pandemic outbreak the European Union can recover at a faster rate than Asia and the United States.

July 21st Macro Drivers

Virus Developments

Second wave virus numbers and possible reinstatement of lockdown measures will be an important one to watch as always.

U.S. Politics with regards to a stimulus will also be important. We have some looming deadlines for some of the key U.S. stimulus programs, which will be very important to U.S. consumers. This is what we call a fiscal cliff edge, meaning a failure to renew these measures or some of these measures or put in alternative measures does open the door for a shock to the economy. So, one to watch for risk assets.2. China vs West

China vs West

The Hong Kong legislation has seen push back from various countries including the U.S., Canada, EU, The UK, Australia and New Zealand so any further escalations or retaliatory measures need to be kept in the mind as it can affect the overall risk sentiment.

Last week we had Trump walk back on additional retaliatory moves against china, which was a slightly more positive development between the two sides.

Brexit

Very thin fundamental news flow on the news for Brexit last week. Negotiations are set to continue. So we need to be prepared for any unexpected significance.

Analysis of ?? USD/ZAR ??

The South African rand looks set to continue its strong gains against the U.S. Dollar.

Fundamental reason behind this trade:

As global equity markets rise and investors sell off U.S. Treasury bonds to exchange U.S. Dollars into international currencies to re-invest in emerging markets equities. This flow of money out of the U.S. and into countries like South Africa offers a good selling opportunity for exchange rates like USD/ZAR.

A push below 16.50000 / 16.00000 offers a strong selling opportunity as long as global equity markets push higher.