Daily Market Report 10 Mar

Daily Market Report – 10 March 2025

Key Market Themes This Week

  1. Budget 2.0 & South Africa’s Fiscal Position
    • The second version of the budget is expected to include a smaller VAT hike (likely 1%) and spending cuts to balance the books.
    • Investors are waiting to see if fiscal consolidation efforts will be credible enough to support bond markets and foreign inflows.
    • Key Watchpoints:
      • Will spending cuts be sufficient?
      • Will SOE reform (privatization) be emphasized?
      • Will there be a clear plan for attracting foreign investment?
  2. Global Trade Uncertainty: Tariffs & Recession Fears
    • Trump delayed Canada & Mexico auto tariffs for another month, easing short-term trade risks.
    • China’s deflation risks (CPI turned negative) highlight weak domestic demand, which could slow global growth.
    • US credit stress: Higher auto loan delinquencies signal household strain.
  3. US Economic Slowdown: Key Indicators Flashing Warning Signs
    • February US jobs data (Non-Farm Payrolls) disappointed – only 151K jobs added (vs. 160K expected).
    • Markets now expect three Fed rate cuts in 2025.
    • US Treasury yields falling → Bullish for bonds, weaker USD helps ZAR.

Market Impact – FX

  • USD-ZAR Outlook:
    • Key Support: 18.0350
    • Key Resistance: 18.4175
    • A prudent budget and weak USD trend could push USD-ZAR towards the 18.0000 handle.
    • Risks to ZAR: If budget disappoints (i.e., fiscal slippage, high spending, or lack of investment-friendly reforms), the ZAR could weaken above 18.4000.
  • Global USD Weakness Continues:
    • DXY at 4-month lows (now 103.59).
    • Fed rate cuts expected → Weaker USD → Stronger ZAR.

Market Impact – Bonds & Interest Rates

  • SA Bonds (Yield Curve)
    • Foreign investors waiting for budget clarity before taking strong positions.
    • If budget is prudent → SA bonds could rally, lowering yields.
    • R209 spread over US 10yr now 650bp (still very attractive for foreign investors).
  • FRAs & Rate Expectations
    • Market pricing in at least 3 rate cuts in SA this year.
    • 3X6 FRA: 20bp cut priced in.
    • 6X9 FRA: 28bp cut priced in.
    • 9X12 FRA: -35bp priced in.
    • 12X15 FRA: -36bp priced in.
    • Lower global yields & weaker USD = Room for SARB to cut rates further.

What to Watch This Week

Wednesday’s SA Budget Speech – Market reaction to VAT hike, spending cuts & reform signals.
China’s deflation risk & credit tightening – Could impact global growth & EMs.
US CPI Data on Tuesday – Could confirm Fed rate cut trajectory.
USD-ZAR reaction at 18.0350 support – A break below could open the door to 17.8900.

Final Thought: Is ZAR Headed Below 18.0000?

  • If the budget is prudent & the USD remains weak, USD-ZAR could break 18.0000.
  • If budget disappoints, the ZAR could face short-term volatility.

Why choose TreasuryONE

Minimise the impact of market volatility on your bottom line by getting access to an experienced team of dealers that provides expert market advice – validated by facts and figures, not feelings or hearsay.

We customise risk management strategies to achieve the most competitive rates in a fast-moving and complex marketplace.

We provide effective and measurable processes for managing:

  • Exchange Rate Risk arises when an organisation conducts business in multiple currencies, either through exports and imports, or through foreign operations.
  • Commodity Price Risk is the financial risk posed to an entity’s financial performance and profitability by fluctuations in commodity prices that are primarily driven by external market forces and are therefore beyond the entity’s control.
  • Interest Rate Risk management for companies involves identifying, measuring, and managing the potential impact of changes in interest rates on a company’s financial position and profitability.