Heat rises on central banks

officials gather for a policy meeting on August 2.
The key meeting is in Europe as European Central Bank president Mario Draghi meets with the Bundesbank president.
The ECB is considering loose measures to relieve pressure on all periphery countries and this week’s meeting will address that.
Greece’s inability to meet fiscal targets is dragging the periphery down and that could add more pressure on Greece to exit the euro.
Last week, Citigroup had placed bets at 90 percent that Greece would leave the eurozone.
European officials have said that they will be tough on all periphery countries especially the Greek government which is yet to approve a €11,5 billion budget cut.
There are two options that will be presented at Thursday’s meeting by European officials, its either they cut rates again by 25 basis points or they buy Spanish and Italian debt to protect bondholders.
The euro is already under so much pressure ahead of that European Central Bank meeting as it fell by 0,6 percent against the dollar to trade at US$1,2257 and there was little change against the pound sterling, trading at 78,08 pence per euro.
The euro trimmed down its losses against the yen to trade at 95,830 yen recovering by 0,5 percent.
The yen fell by 0,4 percent against the dollar to touch 78,180. We could see a bounce in the euro-dollar pair this week as the Federal Reserve continues to make noise about a likelihood of a rate cut to enhance lending from financial institutions and boost growth.
At the moment nothing is certain given that previous meetings by the Federal Reserve failed to rally the market.
There is likely to be a pull back in the euro and looking at support levels of US$1,2180.
In London, the sterling pound continues to hover around multi-year lows of US$1,5699 against the dollar.
Despite Standard & Poor’s reaffirming UK’s AAA rating as stable, the UK economy is struggling fundamentally.
Weak data in the UK has been pushing the pound lower and we could see support levels of US$1,5577 in the sterling pound against the dollar as outlook remains bearish for the pound.
Sterling pound was little changed against the euro trading at 78,08 pence per euro.
There is contraction in almost every sector of the economy in the UK as it continues to slow with the euro-area issues spilling into the UK. In Australia, the dollar fell on prospects that the eurozone is slowing and failing to spur growth-sapping demand for riskier assets.
With the ECB and Federal Reserve policy meetings on the horizon, the likelihood of weakness for growth related currencies is high.
It could also swing in their favour as carry trades could drive these currencies higher but chances are slim at the moment.
The pillar for most of these commodity currencies is Europe and this will be a key trade cycle this week if risk appetite will perform better. The Aussie dollar had rallied to US$1,05 against the US dollar but that rally fizzled out as Europe took centre stage to fall back by 0,1 percent.
For a while we saw a risk-on environment boosting commodity currencies as risk aversion subsided.
South African Markets
The rand declined on prospects that the euro-area’s growth is slowing sapping demand for high-yielding assets like the rand.
The rand, the most volatile commodity currency fell by 0,6 percent against the dollar to trade at 8,2025.
As Europe’s debt crisis heightens, rand assets will mostly be exposed reducing yield on investments mainly on their bond market.
Zimbabwean market
Uncertainty continues to weigh heavily on counters on the ZSE pushing investors to look for companies that can do well regardless of the economic climate.
Counters like Delta, Econet, Hippo Valley, Natfoods, Old Mutual, OK Zimbabwe are top-line revenue companies with good fundamentals.
All these companies have better growth opportunities and can increase shareholder value.
They are fundamentally strong and capable of a share buyback. Looking at Delta, its share price will likely float around US12c per share driven by their earnings numbers in the medium to long term.
Commodity markets
Gold rose by 2,5 percent to US$1 626,90 an ounce from that medium downtrend.
Gold is steady on stimulus hopes and that Asian demand for the metal increases as income in greater Asia continue to rise.
Crude oil was changed a little on poor growth prospects in Europe with manufacturing in China contracting. Crude oil was facing resistance at US$89,75 per barrel.
As the dollar weakens consider geographical trades like the Canadian dollar and Mexican peso as these currencies tend to benefit more on US recovery.