While South Africans continue to religiously don masks before entering public spaces and adhere to social distancing and other restrictions, the threat of a potential third wave still lingers. However, the lifting of lockdowns and the restoration of daily freedoms elsewhere in the world offers a glimmer of hope to those who yearn for normality.
ISRAEL TAKES A LEAD IN THE VACCINATION RACE
In terms of the global vaccination race, Israel is among the frontrunners. This has enabled everyday life there to resume, with social activities back in full swing and masks a mere reminder of a year most would rather forget. Infections have drastically decreased from around 10,000 new cases a day to just 140, and the emergency COVID-19 ward located at the Sheba Medical Center near Tel Aviv has been restored to its role as a parking garage. Health officials have duly noted that the pandemic is far from over, but with most of the Israeli adult population vaccinated, theirs is certainly the closest return to normality currently seen around the world.
Israel first launched its vaccination programme on 20 December 2020, with the Ministry of Health driving the rollout and ensuring that the country’s four main health pillars (health maintenance organizations) each had the ability to distribute the vaccine as broadly as possible. First prioritised were those over 60 years of age, nursing home residents, health workers and individuals with co-morbidities, before turning to younger members of the population from 12 January 2021, with lockdown restrictions easing from 07 February 2021.
Israel faced three waves of lockdown restrictions, yet its breakneck rollout saw it quickly become one of the leading countries globally in terms of vaccinations per capita, with some 55% of its population having already received their first dose of the vaccine.
So, with Israel setting the example, the question then arises as to why many other countries have not been able to follow suit and roll out a campaign of the same magnitude? Some developing nations have cast blame on government inefficiencies, but there are numerous other factors that play a role, including:
- Population size (consider that the United States is home to over 300 million people compared to nine million in Israel)
- Political interference
- Fears around the vaccine amongst the population
- Fiscal resources
- Functioning healthcare facilities
Following on from Israel’s success, there have been many rumours that the United Kingdom (UK) could also soon do away with face masks. However, a top UK epidemiologist this week put a damper on these hopes, indicating that both masks and social distancing are likely be around for some years to come. Ultimately, only time will tell.
Zooming in on the number of vaccines administered per 100 people, it is clear from the graph below that discounting small nations such as Gibraltar and Seychelles, developed nations are leading the race. Note that where the number may be in excess of the number of people, this is due to some vaccines requiring at least two doses.
Graph: Rate of COVID-19 vaccinations worldwide as of April 19, 2021, by country or territory (per 100 people)
By contrast, developing countries are facing significant challenges in rollouts. And, as these countries lag behind in their vaccination programmes, we could see the pandemic and lockdown restrictions take their toll for many more months, and even years.
A recent article by UNAIDS pointed out that wealthier nations are currently vaccinating one person nearly every second, while the majority of individuals from poorer nations are yet to receive even a first dose of the much-needed vaccine. It went on to report that many of these wealthier nations, including the US, UK and European Union (EU), are blocking a proposal by over 100 developing countries that would enable poorer countries to scale up their vaccine manufacturing capabilities.
So, while the future might be free, it seems that is more free for some than for others.
CENTRAL BANKS HOLD THE SPOTLIGHT
The European Central Bank (ECB), as expected, left interest rates unchanged on Thursday, citing the slow rollout of vaccines as the key deciding factor.
Recent data showed that inflation hit 1.3% across the eurozone in March, accelerating rapidly from February’s reading of 0.9%. However, the ECB signalled that it will only seek to raise rates when strong and sustainable growth is evident across the bloc. It then noted that the central bank will continue to buy bonds at “a significantly higher pace than during the first months of the year.”
Meanwhile, the Bank of England (BoE) also made headlines this week as the bank announced its intention to close its cash distribution centre in Leeds in 2023, although plans are in progress to set up a new northern hub in the city. According to the bank, it is responding to two trends that have become clear since the start of the pandemic: the declining role of cash in transactions, and the shift to remote and hybrid working. The BoE said on Thursday that lower use of cash in payments, together with the introduction of polymer banknotes, would cut demand for its distribution, which could be met from its main cash centre in Debden in Essex.
Sticking with the BoE, while its next interest rate decision meeting is only scheduled for May, BoE Governor Bailey is speaking in the coming days and markets tend to show a keen interest whenever a central bank leader takes the stand. This said, the expectation remains for low rates until the pandemic has run its course, in line with its peers at the ECB and Fed.
From a currency perspective, the euro held steady at the $1.20 mark (not far from Tuesday’s seven-week high of $1.207) after the ECB left monetary policy unchanged and maintained its pledge to increase support if needed. Market participants expect the next reassessment of the Pandemic Emergency Purchase Programme (PEPP) flows to take place in June, and the decision on what to do with the PEPP after March 2022 is likely to be made in September.
The pound sterling stood at the $1.39 level on Thursday, down from a seven-week high of $1.40 on Tuesday. Economic data released on Wednesday showed that the UK inflation rate had advanced to 0.7% in March, slightly below market forecasts of 0.8%. Consumer prices are expected to rise in the coming months owing to an increase in regulated household energy bills, higher global oil prices and comparisons with prices a year ago when the country was under a strict COVID-19 lockdown. Meanwhile, financial markets see around a 50% chance of an increase in interest rates by the BoE by the end of next year.
The South African rand remained flat at R14.30 against the greenback on Thursday on the back of a fairly stable dollar, while global investors focused their attention on the ECB meeting. On the domestic economic front, recent data showed that headline annual inflation edged higher to 3.2% in March, mainly due to sharp increases in energy and fuel prices. However, this remains well within the lower end of the South African Reserve Bank’s (SARB) inflation target of between 3% and 6%.
Herewith follows an overview of the week’s key data:
| Actual | Previous | Forecast or ∆% | |
| US | |||
| Initial Jobless Claims 17/APR | 547K | 586K ® | 695k |
| EU | |||
| Construction Output YoY FEB | -5.8% | -2.6% ® | 3.6% |
| Government Budget to GDP 2020 | -7.2% | -0.6% | -8.6% |
| ECB Interest Rate Decision | 0% | 0% | 0% |
| GB (UK) | |||
| Unemployment Rate FEB | 4.9% | 5% | 5.1% |
| Inflation Rate YoY MAR | 0.7% | 0.4% | 0.8% |
| ZA | |||
| Leading Business Cycle Indicator MoM FEB | 2% | -0.5% ® | 3.4% |
| Inflation Rate YoY MAR | 3.2% | 2.9% | 3.2% |
LOOKING AHEAD
Global markets are looking for a new catalyst to provide fresh direction and momentum to the market. A close eye is being kept on the increase in COVID-19 cases globally, but markets remain cautiously optimistic with regards to the global recovery. Additionally, geopolitical backdrops and macro-economic concerns remain overshadowed by the low interest rate environment.
The local currency has been largely flat this week, trading in a tight range of just 11 cents, and we started the day trading at R14.30/$, R17.19/€ and R19.82/£. Just like the greater market environment, a new catalyst is needed for the rand to move in either direction. However, a sustained break below the R14.18/$ mark could see the rand claw its way towards R14.00/$.
Written By: Bianca Botes
Citadel Global: Director