Daily Market Report 12 Mar

Daily Market Report – 12 March 2025

SA Budget Release: Markets on Edge Amid GNU Tensions

Market Overview

The highly anticipated second budget announcement by Finance Minister Godongwana is set to take center stage today. Uncertainty reigns as reports indicate no final agreement between the ANC and DA within the GNU, meaning the budget could still face opposition in Parliament. While investors were hoping for a clear fiscal path, speculation suggests the ANC will push ahead regardless, setting up a potential political battle that could impact markets.

Key Themes to Watch

Budget Uncertainty & GNU Tensions

  • DA rejects VAT hike and demands reforms like scrapping Expropriation Without Compensation (EWC).
  • ANC wants to push ahead with VAT increase, arguing it’s the fastest way to raise revenue.
  • If budget is passed without DA support, GNU fractures further, hurting business & investor confidence.

ZAR Struggles Despite Weaker USD

  • The USD Index (DXY) is down near 103.43, as US economic data weakens.
  • ZAR unable to capitalize on USD weakness due to budget risks & global stock sell-off.
  • Global equity markets crashing amid US recession fears and Trump’s tariff policies.

US & Ukraine Ceasefire Talks

  • Ukraine has agreed to a temporary ceasefire, pending US negotiations with Russia.
  • Markets welcome de-escalation, boosting risk appetite and easing European economic fears.
  • If successful, risk assets (including ZAR) could benefit, provided SA’s budget doesn’t disappoint.

Market Impact – FX

  • USD-ZAR Outlook:
    • Key Support: 18.0350
    • Key Resistance: 18.4175
    • ZAR under pressure due to budget risks, despite USD weakness.
    • If budget disappoints, ZAR could weaken beyond 18.4000.
    • Risk-on environment (peace talks, weaker USD) could help ZAR, but fiscal concerns remain dominant.
  • Global USD Weakness Continues:
    • Fed rate cuts expected → Weaker USD → Stronger ZAR potential.
    • Risk sentiment dominates → If global equities keep crashing, ZAR could struggle.

Market Impact – Bonds & Interest Rates

  • SA Bonds (Yield Curve)
    • Bond auction demand surged yesterday, reflecting defensive investor positioning.
    • If budget is prudent, SA bonds could rally, lowering yields.
    • Foreign investors waiting for clarity before taking larger positions.
  • FRAs & Rate Expectations
    • Market pricing in at least 3 rate cuts in SA this year.
    • 3X6 FRA: 24bp cut priced in.
    • 6X9 FRA: 30bp cut priced in.
    • 9X12 FRA: -37bp priced in.
    • 12X15 FRA: -39bp priced in.
    • Lower global yields & weaker USD = Room for SARB to cut rates further.

What to Watch Today

SA Budget Speech at 14:00 SAST – Will the budget be passed without GNU unity?
USD-ZAR reaction at 18.0350 support – A break below could open the door to 17.9500.
Global stock market trends – If equities keep falling, safe-haven flows could cap ZAR gains.
US CPI Data – Inflation figures could shape Fed rate cut expectations, impacting USD-ZAR.

Final Thought: Make-Or-Break Moment for SA Markets

  • If the budget delivers fiscal consolidation & reforms, ZAR could break below 18.0000.
  • If political uncertainty remains high, ZAR could struggle above 18.4000.

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