- It was a relatively uneventful session in Zambia yesterday amid a dearth of meaningful data.
- Alongside a slight improvement in risk appetite, base metal prices stabilised. Copper prices on the LME rose 0.7% a tonne to $8,029, while zinc prices advanced 0.4%. Some soothing words from Boston Fed President Rosengren that anticipates a stronger rebound in H2 2021 will be a key factor in boosting global growth expectations. As vaccines continue to be rolled out and the pandemic dealt with, investors will steadily be-come more constructive on demand.
- As this year unfolds, some stability will likely return to base metal prices. The current lockdowns being imposed in China will pass. China is acting aggressively to curb the spread of the virus, and there will be a negative impact at the margin, but that too will pass as vaccines are steadily rolled out.
- Stateside, today will likely see another vote in the House of Representatives to impeach Trump. If it goes ahead, there is almost no doubt that Trump will set a new record as the only president to be impeached twice by the House. From there it will head to the Senate for trial, but it is unclear whether this will take place before his term in office ends, or whether enough Republicans in the Senate will vote with the Democrats to be able to convict Trump and oust him in time. An impeached and convicted president would not be allowed to contest a second term in office which is undoubtedly one of the objectives of the Democrats.
- Vaccine rules have changed. In response to the rapid spread of the virus, the US authorities have sought to utilise the second doses that people are supposed to receive to inoculate more people quickly. They are of course hoping that the logistics of more doses arrives in time to be able to inoculate those that need it with their second dose while still achieving greater resistance to the virus. The numbers make sense. The first dose offers more than 70% efficacy. Waiting for the second dose to raise the efficacy to more than 90% vs doubling the amount of people with a 70% efficacy, makes the choice relatively clear.
- Boston Fed President Rosengren has made it clear that the economy is likely to have a strong H2 2021. Once enough people have been vaccinated and the economy can open up a lot more, then the full effects of all the monetary and fiscal stimulus will become clear. There is much pent up stimulus waiting to be unleashed and the US economy is likely to go into a post-pandemic boom.
- Shifting to the FX markets, Some upbeat comments from Boston Fed President Rosengren, a more conciliatory tone by President Trump, and decisions to vaccinate more people with the spare doses has reduced overall risk assessments. Equity markets held up reasonably well yester-day and have remained supported today. US Treasury yields have caught a fresh bid and yields have stopped surging which has also helped put the brakes on the USD spike. With so much counting against the USD in so far as the twin deficits, loose monetary policy and the virus, the USD is expected to resume its depreciative bias. This should offer some relief to the Kwacha at the margin. The local unit remained on the back foot yesterday according to Reuters data and has started the year on the defensive, currently down by 0.45% on a YTD basis. Losses are, how-ever, modest when compared to its regional peers South Africa and Botswana.