Daily Market Report – 12 June 2025

Rand Retreats Amid Rising Middle East Tensions and Weak Mining Data

The  rand weakened sharply on Thursday, retreating from its recent strength as geopolitical tensions in the Middle East escalated and disappointing domestic mining data raised new concerns about South Africa’s growth trajectory.

The catalyst for the ZAR’s pullback came overnight when Israel launched “Operation Rising Lion,” a military campaign targeting Iran’s nuclear and military infrastructure, including the Natanz uranium site and Revolutionary Guards’ headquarters in Tehran. The operation, which reportedly killed top Iranian military officials, has stoked fears of a wider regional conflict. In response, the US ordered non-essential embassy staff and military dependents to leave Iraq, Bahrain, and Kuwait, citing “heightened regional tensions”.

Despite a surge in gold and platinum prices—both of which benefit South Africa’s terms of trade—the rand fell to 17.9250/USD in early trading, with technical analysts pointing to 18.1900 as the next resistance level. “A base has now formed just below 17.7000,” noted ETM Analytics, “but geopolitical risk aversion has prompted a reversal that could extend further”.

Adding to the ZAR’s woes was a grim reading from South Africa’s mining sector. Output plunged -7.7% y/y in April, far worse than the -4.0% decline expected by analysts, and a marked deterioration from March’s -2.5% print. The data confirms that the mining sector, despite higher commodity prices, remains mired in a technical recession.

Meanwhile, global market sentiment remained fragile. Although the US inflation print came in at a relatively tame 2.6%, concerns over President Trump’s pending tariff adjustments and the implications of further military escalation in the Middle East overshadowed any optimism. Wall Street closed lower, and safe-haven assets such as gold saw renewed interest, with prices climbing to $3,374.61/oz.

Domestically, President Cyril Ramaphosa’s announcement of a new “National Dialogue” initiative failed to inspire market confidence. Aimed at building consensus for Vision 2030 and the National Development Plan, the initiative was met with skepticism from investors who called for tangible reforms rather than further discussion.

Bond Market Holds Firm

Despite the ZAR’s pullback, South African bonds remained broadly stable, supported by earlier inflows and a still-bullish outlook on inflation containment. The SARB’s push toward a 3% inflation target continues to anchor expectations for lower long-term yields, even as geopolitical volatility clouds the outlook.

Today’s inflation-linked bond (ILB) auction is expected to be closely watched for signs of whether investors are beginning to reprice inflation risks amid rising oil prices and a weaker currency.

Outlook

While markets digest the implications of the Israel-Iran escalation, the ZAR is likely to remain under pressure in the near term. However, analysts caution against overreacting to a single geopolitical event. “Over the medium term, the structural factors weighing on the USD—fiscal concerns, valuation, and trade deficits—still point to a weaker greenback,” ETM noted.

For now, all eyes remain on the evolving Middle East situation, the trajectory of US tariffs, and whether South Africa can turn commodity tailwinds into tangible economic growth.

• Deep Expertise: Our team offers over 150 years of combined financial experience.

• Cost-Efficient: Outsourced risk management cuts costs by sharing our expertise, systems, and scale.

• Fair FX Pricing: We understand how banks price and use that knowledge to secure fair, competitive rates.

• Technology-Led: Real-time insights and robust reporting via advanced treasury systems and analytics.

• Proactive Support: We offer consistent updates, strategic advice, and timely hedging recommendations.