Daily Market Report 11 Feb

Daily Market Report 11 Feb

ZAR Holds Steady as Trump’s Policies Unfold

Key Developments

  • South Africa: Mixed Reactions to Trump’s Executive Orders
    • Trump’s Aid Cut Does Not Affect PEPFAR, ensuring continued HIV/AIDS funding.
    • DA challenges the Expropriation Act in court, deepening ideological divides within the GNU.
    • Ramaphosa’s envoys prepare for US engagement, aiming to ease geopolitical tensions.
    • SA braces for potential AGOA exclusion, impacting trade prospects later in 2025.
  • Global: Trump’s New Tariffs Shake Markets
    • US imposes 25% tariffs on all steel & aluminum imports, regardless of origin.
    • Further tariffs on downstream steel-related products planned, aimed at boosting US manufacturing.
    • Boston judge blocks Trump’s federal workforce buyout, delaying his government downsizing plan.
    • US Treasury yields remain stable, as investors await key CPI & Powell testimony this week.

Market Insight – FX

  • ZAR Performance
    • Spot: 18.4550 | Range: 18.3075 – 18.6450
    • ZAR steadied after initial volatility, with PEPFAR exemption helping calm market fears.
    • DA’s legal challenge signals resistance to EWC, offering investors some reassurance.
    • Markets await clarity from SA-US diplomatic talks, with AGOA’s fate still uncertain.
    • Key support at 18.3100, while resistance near 18.6450 may limit gains.
  • Global FX Trends
    • USD Index consolidates near 108.45, as markets digest Trump’s latest tariff moves.
    • EUR/USD remains range-bound around 1.0300, with support at 1.0250 & resistance at 1.0400.
    • GBP/USD steady, as BoE policymaker warns of weak consumer demand & job losses.
    • USD/JPY near 152.00, with Japanese markets closed for a public holiday.

Market Insight – Fixed Income

  • US Treasuries & Global Bonds
    • US 10-year yield dips slightly to 4.46%, as investors await Powell’s testimony & CPI data.
    • Fed remains cautious, with officials monitoring Trump’s tariff impact on inflation.
    • US Treasury supply & market reaction to tariffs to drive bond flows this week.
  • SA Bonds & FRAs
    • SA bond yields likely to tick higher, reflecting ZAR volatility & fiscal risks.
    • Investors await SA budget for policy clarity, with fiscal constraints limiting government action.
    • FRAs remain stable, pricing in a gradual rate-cut trajectory:
      • 3X6 FRA now reflects 16bp of cuts.
      • 6X9 FRA pricing in full 24bp cut in Q3.
      • 9X12 FRA projects a 28bp cut, while 12X15 FRA compresses to -31bp.

Outlook

  • ZAR expected to trade cautiously, with Trump’s policies creating uncertainty.
  • SA’s diplomatic approach to US tensions critical, with AGOA talks now in focus.
  • US Fed policy remains in wait-and-see mode, with tariff-induced inflation risks rising.
  • Powell’s congressional testimony & US CPI key events this week, impacting USD sentiment.
  • SA’s upcoming budget will be closely watched, as investors seek credible fiscal reforms.

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