Daily Market Report – 13 May 2025

ZAR Faces Headwinds Amid USD Resurgence

USD Strength: The Rebound Catalyst

• US-China Trade Truce: Tariffs reduced by 115 ppts in a 90-day pause → markets cheered, equities surged, USD soared.
• Fed Funds Futures Reset: Pricing only two rate cuts now, down from four in early April.
• 10Y UST yields hit 4.46%, highest in a month → supports dollar strength.

ZAR Implications

• Terms of Trade Weaken: Gold down, oil up = negative for SA’s trade position.
• Carry Trade Margins Narrow: SA’s rate differential vs. US shrinks → ZAR less attractive.
• Spot: 18.2450
• Range: 18.13 – 18.45
• Support: 18.1800 (200DMA)
• Resistance: 18.4500 (Fibo zone)

Geopolitical Flashpoints: Diplomatic Tensions Simmer

Ramaphosa–Trump Face-off

• Trump doubled down on white farmer “genocide” rhetoric, welcoming SA “refugees”.
• Ramaphosa’s visit to Washington will be symbolically charged, amid SA’s:
  • ICC action vs. Israel
  • BRICS+ alignment
  • Russia-China partnerships

Market Risk: If Trump leverages diplomatic tensions into trade or financial sanctions, this could seriously impair ZAR sentiment.

SA Budget & GNU Dynamics: A Delicate Balance

• DA cautiously supports 3rd budget draft: Still “a work in progress”
• Positive signal, but lingering policy divergence
• Budget passage on May 21 remains key for:
  • Rating stability (S&P call this Friday)
  • Market reassurance
  • Structural reform narrative (Operation Vulindlela)

Fixed Income: Bond Yields Face Resistance

US Yields Rising

• UST 10Y: 4.46%
• US exceptionalism narrative = stronger USD, weaker bonds
• Less appetite for SA bonds as hedge

SA Yield Curve Pressure

• Despite soft mining/unemployment data, SA yields must stay elevated to retain investor appeal
• Weak data largely priced in; market focus shifts to:
  • Bond auction
  • Budget signals
  • US CPI release

FRA Market: Easing Expectations Pull Back

• Rate cut expectations moderating, in line with USD strength and Fed hawkishness
• ZAR depreciation risk, unless SARB remains data-driven and ZAR stabilizes

Global Macro Snapshot

• Dollar Index: 101.61 (up from 100)
• EUR/USD: Broken below 1.1100, rebounded marginally
• GBP/USD: Negative momentum; support at 1.3137
• USD/JPY: Briefly over 148, now correcting as exporters sell rallies

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