Daily Market Report 30 Jan

• SARB Rate Decision Looms Amid Market Uncertainty

  Key Developments

  • US Fed Holds Rates at 4.25%-4.5%:
    • The FOMC kept rates steady in its first 2025 meeting, with a more cautious tone on inflation.
    • Fed Chair Powell downplayed immediate cuts, reinforcing that inflation remains elevated and labour markets strong.
    • Markets now expect two rate cuts in 2025, likely starting in June, as Trump’s trade and fiscal policies create uncertainty.
  • South Africa:
    • SARB Rate Decision (Today):
      • Markets expect a 25bp cut, but recent financial market volatility, a strong ZAR, and Trump-related risks could push the SARB to hold.
      • Inflation remains low at 3.0% y/y, but factors like Eskom tariff hikes and fiscal risks may warrant caution.
    • Fiscal Concerns & Budget Risks:
      • Treasury’s austerity drive faces legal challenges, as the court rules against SRD grant cuts.
      • Speculation grows about a municipal bailout in the February budget, with potential Eskom implications.
    • Economic & Political Developments:
      • Toyota CEO warns of deindustrialization risks, calling for investment-friendly policies.
      • The SIU orders lifestyle audits on Joburg metro employees amid corruption concerns.

  Market Insight – FX

  • ZAR Performance:
    • Spot: 18.5400 | Range: 18.4175 – 18.6850
    • The ZAR has recovered from its early-week losses but remains cautious ahead of SARB’s decision.
    • Fed conservatism supports the USD, but SARB’s stance will be key to ZAR direction.
    • A rate hold could support the ZAR, but a cut might introduce short-term volatility.
  • Global FX Trends:
    • USD Index stabilizes, with a potential bullish breakout if rate cuts are delayed.
    • EUR/USD consolidates, awaiting today’s ECB rate cut, which could pressure the euro.
    • GBP/USD remains firm, but UK economic concerns limit upside.
    • USD/JPY finds support, with hawkish BoJ comments suggesting a rate hike by mid-year.

  Market Insight – Fixed Income

  • US Treasuries:
    • Yields fell as investors reassess Fed guidance and Trump’s potential fiscal stimulus.
    • The Fed’s cautious stance suggests no imminent rate cuts, keeping bond markets volatile.
  • SA Bonds:
    • Bonds have recovered losses, driven by fiscal optimism and speculation on SARB’s decision.
    • Investment-grade ambitions and potential austerity measures could further support bonds.
  • FRAs & Rate Expectations:
    • 3X6 JIBAR spread (-30bp) suggests a rate cut today is still expected.
    • 6X9 (-39bp) and 9X12 (-45bp) indicate uncertainty on further cuts beyond Q1.

  Outlook

  • SARB’s decision will dictate ZAR direction:
    • A 25bp cut could weaken the ZAR slightly, but reaffirm inflation control.
    • A rate hold would reinforce SARB’s conservative stance, stabilizing the ZAR.
  • Trump’s policies & global market volatility remain key risks.
  • Investors await the SARB’s tone on fiscal risks, inflation targets, and economic outlook for clues on future policy moves.

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