- Zambia’s Finance Ministry on Friday announced that it will hold talks with the International Monetary Fund (IMF) from February 11 to March 3 about a formal relief programme. The Ministry said the engagement with the fund would be under an Extended Credit Facility. Moreover, the Ministry added that “the programme discussions will centre on the government’s objectives to attain fiscal and debt sustainability and on key pillars in the economic recovery program”. The news comes days after Zambia’s mining investment arm ZCCM-IH agreed to take on $1.5bn in debt for Glencore’s stake in Mopani Copper Mines, making it the sole owner of the mine. There has been concern that the deal could com-promise a drive for debt sustainability likely to be required as part of any support from the IMF, which said it had not been consulted.
- On the base metals front, a rise in the COVID-19 infections in China as well as seasonally low demand ahead of the Lunar New Year has taken copper off the boil this morning. Prices fell this morning in the Asian session with the 3m LME contract cementing its position below the $8000.00/tonne mark.
- Just a few days into the Biden presidency and there is a lot to contend with. More than a dozen executive orders have been signed, the White House is pushing hard for the $1.9trln stimulus package but is meeting with some resistance on its size, Biden is hinting at implementing more travel bans to curtail the spread of new variants of the virus, and geopolitical tensions are escalating between China and Taiwan which will do little to promote relations between China and the US.
- Beyond just keeping track of developments in the economy and the unfolding pandemic, this week’s main event will be the FOMC decision and statement and the guidance that Fed Chairman Powell offers the market. No change is anticipated, but the focus will be on the commit-ment the Fed shows to leaving monetary policy accommodative, to see if any insight into the duration of support can be gleaned. The over-whelming expectation is that the Fed will proceed cautiously so as not to disrupt financial market sentiment and cause further disruption at such a sensitive time in the economic recovery.
- Beyond just stepping up the efforts to distribute vaccines, the Biden administration may look to impose fresh travel bans in order to limit the spread of different variants within their economies. The fact that they have already identified their presence means that it may already be too late, but it does raise the prospect that travel bans could once again become a factor to consider through the months ahead. Bans for visitors to South Africa and Brazil will likely be the first to be implemented.
- Although the USD may have paused its decline, the bias remains tilted towards further depreciation. Concerns over new Covid variants with greater transmissibility have investors concerned, and that rise in risk aversion will support the USD. Offsetting this however will be the expec-tation that vaccine rollouts will only gather momentum as more vaccines are approved and the authorities become more efficient in immunis-ing the population. For now, selling USD upticks still appears to be the strategy of choice.
- The final trading session of the week saw the Kwacha halt its recent run of losses, closing on the front foot against the USD , according to Reuters data. Expectations are, however, that the rebound will be short-lived this week as a broader bearish bias is set to remain entrenched given demand for hard currency is forecast to outweigh supply.
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