Daily Market Report 16 Apr

Daily Market Report – 16 Apr 2025

ZAR Slips on Mining Data, But Political Winds Still Favour Appreciation

South Africa: Mining Shock Offsets GNU Progress

South Africa woke up to the worst mining print in over a year – a -9.6% y/y contraction in February, driven by PGMs, gold, and iron ore. This was despite record prices in precious metals. The data strongly underscores SA’s deindustrialisation trend and the deep structural issues (regulation, logistics, policy misalignment) facing the sector.

Key Developments:

  • Gold mining down -7.6% y/y despite a price boom.
  • Sales fell 12.9% y/y, led by iron ore and gold.
  • SARB warns of a worst-case GDP contraction of -0.7%, should trade tensions escalate and ZAR weaken sharply.
  • ANC falling behind DA in IRR polling – a watershed moment in SA politics.
  • Ramaphosa deploys Mcebisi Jonas as special envoy to Washington amid fears of US sanctions.

The mining data is a warning flare, but it also adds pressure on the ANC to accelerate economic reform, especially if they hope to salvage credibility pre-election.

ZAR Snapshot

  • Spot: 19.0200
  • Range: 18.9100 – 19.2300
  • Bias: Bullish recovery continues – data dip is temporary headwind

Our View: Mining disappointment has stalled momentum temporarily. But the ZAR rally could resume, especially if:

  • GNU talks yield a VAT-free budget
  • The US softens its geopolitical stance
  • SA commits to genuine pro-market reforms

Look for USD-ZAR to test 18.74 on further political clarity.

Global Macro Highlights

  • USD Index pivoting around 99.70, under pressure from:
    • Strong eurozone data
    • Bullish EUR/USD pushing toward 1.1500
    • US Retail Sales & Powell speech in focus today
  • Safe-haven buying in yen, Swiss franc continues amid trade volatility
  • UST yields down ~4bp (10Y at 4.32%) on stagflation fears fading

Theme of the Week: Global investors are shifting from panic to positioning, eyeing rate cuts by June from the Fed.

Fixed Income View – Domestic and Global

  • SAGBs: Slightly pressured by mining data, but ZAR strength still offering support
  • Investors want GNU resolution and budget clarity
  • SARB’s warning (-0.7% GDP in worst case) is a call to fiscal action

Our Bond Strategy:

  • Short-term consolidation
  • Longer-term: reform = re-rating
  • Yield spikes = buying opportunity, especially if greylisting is lifted

FRAs: Still Steady, But Risks Skewed to Cuts

  • 3X6 FRA: 24bp of cuts priced
  • 6X9 FRA: -50bp
  • 9X12 FRA: -54bp
  • 12X15 FRA: -54bp

Interpretation: The market’s expecting 1–2 cuts this year. A constructive GNU and global dovish tilt could steepen this curve and bring more cuts into play.

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