14 Jan

Daily Market Report 14 Jan

Offshore Inflation Data Set to Influence Global Monetary Policy

Domestic Developments

Matric Results: Pass rates soar, but the decline in STEM graduates raises concerns.

National Health Insurance: Health Minister refutes claims of compromising on the NHI.

Equity Consultations: The Department of Trade, Industry, and Competition (DTIC) invites consultations on proposed equity targets for various economic sectors.

Infrastructure Concerns: Elevated US bond yields challenge SA’s bond performance, with spreads tightening to historic lows.

Global Focus

US and UK Inflation Data:

UK CPI: Expected to rise to 2.7% y/y in December, driven by fuel costs and services inflation, supporting a cautious approach by the BoE to rate cuts.

US CPI: Forecasted at 2.9% y/y, potentially stalling further Fed rate cuts. Elevated US bond yields reinforce the USD’s strength.

Gaza Ceasefire: Progress in Doha raises hopes for regional stability.

Market Insight – FX

ZAR: The ZAR recovered slightly below the 19.00 handle, supported by undervaluation and SA’s buoyant terms of trade. However, US inflation data this afternoon could shift sentiment.

Spot: 18.9700; Range: 18.91/19.2400.

USD: The dollar remains strong on resilient US labour market data and elevated Treasury yields. Key global pairs:

EUR/USD: Trades around 1.0250, with limited upside due to USD strength.

GBP/USD: Weak at 1.2200, reflecting UK fiscal and inflationary concerns.

Market Insight – Fixed Income

SA Bonds: Elevated US bond yields limit domestic bonds’ upside, with SA’s 10-year spread over US Treasuries compressing further. Investors remain cautious amid tight spreads and inflationary pressures.

FRAs: Market consolidates, with diminished expectations for multiple SARB rate cuts in 2025.

1X4 FRA: -19bp, signaling limited room for early-year cuts.

Global Outlook

BoJ Policy Meeting: Rising Japanese bond yields and wage growth may prompt another rate hike, signaling a shift in post-deflation economic policies.

US 10-Year Treasury Yields: Hovering above 4.76%, bolstered by strong US economic performance and inflation concerns.

Outlook: Inflation data from the US and UK will shape global monetary policy expectations, keeping the USD strong and SA assets defensive. Long-term solutions, including private sector inclusion, remain key for SA’s fiscal health.

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