Daily Market Report 10 Feb
Trump Cuts US Aid to SA – Markets React to New Reality
Key Developments
- South Africa: Immediate Consequences of Trump’s Executive Order
- US halts all financial Aid & assistance to SA, citing concerns over land expropriation, racial policies, and geopolitical stance.
- SA now bracing for exclusion from AGOA, as Trump’s executive order signals broader economic consequences.
- Glencore warns of high electricity costs, further pressuring SA’s industrial sector & mining output.
- Trump announces new 25% tariffs on all steel & aluminum imports, raising global trade tensions.
- Global: US-South Africa Diplomatic Rift & Market Fallout
- Trump labels SA’s stance on Israel, Russia & Iran a security risk.
- SA’s exclusion from AGOA expected later in 2025, impacting trade access.
- Afrikaner groups dismiss “mass exodus” fears, but SA policies now face global scrutiny.
- US Fed policy remains cautious, with Fed officials weighing inflation risks tied to tariffs.
Market Insight – FX
- ZAR Performance
- Spot: 18.5050 | Range: 18.3075 – 18.6450
- ZAR fell sharply in Asian trade after Trump’s announcement but stabilized at 18.50 as markets digested the news.
- Loss of US Aid could be offset by BRICS partnerships, but trade & investor sentiment remain fragile.
- Markets await SA’s response, with focus shifting to budget speech for economic direction.
- Support at 18.3100, while upside resistance at 18.6450 caps further depreciation.
- Global FX Trends
- USD Index above 108.00, buoyed by tariff concerns & US labor data.
- EUR/USD drops to 1.0305, weighed by ECB rate-cut outlook & tariff risks.
- GBP/USD declines post-BoE rate cut, touching 1.2362 intraday before modest recovery.
- USD/JPY clears 152.00, as importer demand & short-covering support price action.
Market Insight – Fixed Income
- US Treasuries & Global Bonds
- US 10-year yield rises to 4.489%, as wage growth surprises to the upside.
- US labor data mixed, with job gains below expectations, but unemployment falling to 4.0%.
- US consumer sentiment dips, reflecting inflation concerns tied to Trump’s tariff policies.
- SA Bonds & FRAs
- SA bond market yet to react, but yields expected to rise amid fiscal & geopolitical uncertainty.
- Market pricing in fewer SARB rate cuts, with some upward pressure on long-term yields.
- FRAs adjusting to weekend developments:
- 3X6 FRA now reflects 17bp rate cut probability.
- 6X9 FRA still pricing in full 25bp cut in Q3.
- 9X12 FRA moderates to 28bp, with 12X15 FRA at -34bp.
Outlook
- ZAR faces renewed pressure as markets digest long-term US-South Africa fallout.
- Focus shifts to SA budget speech, where policy clarity will be key for investor confidence.
- US-China trade war escalates, with WTO filing from China & Trump’s tariff threats continuing.
- US Fed policy to remain cautious, as tariff inflation risks complicate rate-cut trajectory.
- SA must seek alternative trade partnerships, with BRICS support a potential offset to lost US ties.
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