Currency risks in Zambia have started to heighten especially that the kwacha on 23 July extended a losing streak by 1.2% to 12.95 after having opened previous day session at 12.82. Clusters of dollar demand have sagged the copper currency to one and half lows, pushing the local to levels a few points below the 13 psychological mark. Intraday trade saw the Kwacha cross 13 but reversed some of those losses settling at 12.95.
Markets remain cash tight but that seems to be outweighed by dollar demand from agriculture and energy sectors. Market expectations that the month end payroll conversions would offer a safety net to the copper currency, are fading as the vulnerability for weakness is stronger than anticipated.
“The weakness in currency is a concern as it signals a stronger push on input inflation that could dampen business pulse further, Mutisunge Zulu a Non Executive Lead Analyst for the Business Telegraph said in his commentary on 24 July on Behind the Markets show on MoneyFM. Operating costs will be under pressure and coupled with lack of money in the economy, July print for business pulse could worsen even further, he said.
COMMODITIES: On the International markets we see that base metals markets rallied especially on revived talks between US and China there’s a delegation of the United States trade representative that are flying in to China to commence the next round of talks. London metals rallied with copper up 0.2% trading just shy off $6,000 a metric ton at $5,983 while Aluminum was up 0.3% as Zinc also rallied by the same margin. Lead was up just a few points above 0.6%. In Asian trade the Shanghai Futures Exchange reading recorded losses which saw copper sliding 0.7% as tin is traded at a 3 week low being the largest loser this year having shaved 9% in price. Base metal price rally was also bolstered by progress on US China trade talks with US officials on their way to China to rekindle talks.
INTERNATIONAL CURRENCY MARKETS: Europe markets are jittery with Boris Johnson the Conservative party leader succeeding Theresa May today. This move has sent the sterling to 2 year lows as markets are very nervous about his Brexit stance that reflects the views of the British. Investors are waiting to see who the chancellor, foreign secretary and Brexit minister will be under Boris Johnson’s leadership. The euro is trading at a 2 month low as it gauges what the European Central Bank – ECBs policy stance would be amidst expectations that lower interest rates could actually be pricing in a 10bps depot rate cut. The common currency was down 0.05% trading for 1.1145 after hitting 1.1143 the lowest since May 31.
Middle East tension and US crude inventory slide by 11 million barrels to 449 million barrels has pushed oil prices with Ice Brent the international benchmark trading 20cents higher at $64/bbl after jumping 1% yesterday. WTI US crude futures rose 23cents to $57/bbl after rallying right about 1.2% yesterday. The IMF cut international global growth forecast to 3.2% from 3.5% weighing key risks such as Brexit and the US China trade impasse.
Markets continue looking for clues as to what to expect in July 30-31 FOMC meeting where a 25bps rate cut is expected.
