Daily Market Report – 12 May 2025
ZAR Resilience: Still Holding, Still Earning
Drivers of Current Strength
- GNU Stability: Reports indicate a constructive GNU meeting. The DA appears ready to back the third iteration of the budget on May 21 — a massive win for fiscal credibility.
- Improved Risk Sentiment:
- US-China talks showing progress
- Putin-Ukraine meeting prospects (however tentative)
- S&P Ratings Call (Friday): Potential for a stable outlook or even an upgrade based on:
- Narrowing budget deficit
- SARB independence
- Progress on FATF greylist removal
- Operation Vulindlela traction
Technicals
- Spot: 18.2000
- Support: 18.1300 (recent low), 18.1800 (200DMA)
- Resistance: 18.4500 (Fibo retrace)
Global Politics & Macro: Trade Talks, Tariffs, and Central Bank Conservatism
US-China Trade Developments
- “Substantial progress” noted in early rounds of talks
- Trump hinting at softening tariffs (from 145% to ~80%)
- USD positive in the short-term, but longer-term risks persist
- Fed remains cautious, waiting for more data
Ukraine-Putin Meeting?
- Thin on substance, but headline value supports risk assets
- Any diplomatic gesture = risk-positive, ZAR-supportive
FX Outlook: Dollar Steady, ZAR Outperforms Peers
USD Dynamics
- Slight firming on improved Treasury yields (10Y at 4.40%)
- Dollar Index remains under pressure, with bearish sentiment dominating medium-term
- EUR/USD 1.1200 support holding → technical optimism for further USD weakness
ZAR Relative Strength
- Outperforming AUD, NZD: Reflects relative EM optimism
- Rangebound for now, but setting up for renewed downside in USD-ZAR pending key events
Fixed Income: Local Bonds Recover, FRA Market Holds the Line
Bond Market
- Domestic bonds rallied; the April sell-off fully unwound
- ILB auction underwhelmed (only R540mn of R1bn sold), likely due to:
- Lower inflation expectations
- Stronger ZAR and softer oil prices
- Yields drifting lower, aligned with improving sentiment
FRA Curve Snapshot
| FRA Tenor | Implied Rate Cut |
|---|---|
| 2X5 | 27bp |
| 3X6 | 44bp |
| 6X9 | 57bp |
| 9X12 | 64bp |
| 12X15 | 64bp |
- ZAR stability and subdued inflation support SARB easing in June
- Two cuts before year-end still likely, unless global yields surge again
Final Thoughts
The ZAR’s strength this week is earned, not random. It reflects:
- GNU cohesion
- Improving fundamentals
- Decent global sentiment for now
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