Daily Market Report – 14 May 2025

SA Unemployment: A Structural Time Bomb

Q1 2025 Labour Data Snapshot

• Official Unemployment Rate: ↑ to 32.9% (from 31.9%)
• Expanded Rate: ↑ to 43.1% (from 41.9%)
• YoY Employment Growth: +0.3% — essentially stagnant

Structural Deficiency

• One of the highest unemployment rates globally
• 10+ years above 25% = entrenched systemic failure
• Core issues: low educational attainment, skills mismatch, and policy misalignment (e.g., BEE, rigid labour laws)

Policy Implication

The GNU and upcoming budget must show clear signs of:

• Labour market liberalisation
• Public-private partnerships
• Education and vocational reform

This data was politically and economically ill-timed, as it weakens SA’s narrative just ahead of:

• The S&P Ratings Review (Friday) and
• Ramaphosa’s high-stakes meeting with Trump in Washington

ZAR Outlook: Hit by Labour, Helped by US CPI Miss

FX Reaction

• Spot: 18.3150
• Range: 18.13 – 18.45
• Support: 18.1800 (200DMA)
• Resistance: 18.4500 (76.4% Fibo)

Market Drivers

• ZAR weakened post-SA labour data
• Recovered partially as US CPI came in soft, helping unwind USD strength

Inflation Impacts

• US CPI YoY: 2.3% (vs. 2.4% forecast)
• Core CPI: 2.8% steady
• Surprise soft reading → USD softened, ZAR stabilized

Fixed Income: Strong Auction, Soft Sentiment

Bond Auction Results

• Demand surged: R14.86bn in bids (vs. R1bn allotment)
• Cover Ratios: R2040 (4.6x), R2032 (3.9x), R2035 (3.6x)
• Yields: Competitive across tenors
  • R2032: 9.68%
  • R2035: 10.46%
  • R2040: 11.47%

Market Reaction

• Despite auction success, bond market softened on:
  • Poor labour data
  • Uptick in US Treasury yields

FRA Market: Hawkish Shift Post-CPI

• Curve flattening
• Cut expectations now closer to 1–2 for 2025 (from 3+ in April)
• ZAR weakness and Fed conservatism muting SARB cut confidence

Geopolitics: Ramaphosa Faces a “Pressure Cooker” in Washington

Trip to Washington – What’s at Stake

Ramaphosa’s Goals:

1. Stabilize trade relations with the US
2. Clarify SA’s economic and foreign policy direction
3. Secure HIV/AIDS assistance and avoid G20 snub

Trump’s Agenda:

• Push SA on:
  • Israel ICC charge
  • Russia and Iran alignment
  • ANC domestic policy stances
• Reassert US geopolitical leverage over Africa

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