Daily Market Report 17 Apr

Daily Market Report – 17 Apr 2025

ZAR Holds Steady as SA Heads into Easter Break

Domestic Data Weighs, But ZAR Holds Firm

Despite a week of disappointing economic data – notably mining (-9.6% y/y) and retail sales (3.9% y/y) – the ZAR remains resilient, buoyed by hopes of political progress on the GNU budget front.

Retail Sales Recap:

  • Slowed sharply in February: 3.9% y/y vs 7.0% y/y (Jan)
  • Missed consensus estimate of 6.6% y/y
  • SARB flags that 75% of two-pot savings already spent, meaning limited future support for consumption

SARB Warning:

  • Worst-case GDP contraction of -0.7% flagged if trade tensions and currency pressure escalate.

Global Picture: Trade War Risks Escalate

  • Fed Chair Powell: Tariffs risk derailing both employment and inflation mandates. Fed “not stepping in yet.”
  • US-China Trade: Tensions deepening:
    • China threatens countermeasures
    • US reportedly pushing 70 nations to block transshipments via China
  • WTO warns China-US trade flows could drop 80% this year
  • Markets react: Nasdaq drops on Nvidia warning and chip-related export controls

ZAR Snapshot

  • Spot: 18.8500
  • Range: 18.7375 – 19.0400
  • Bias: Appreciative, barring external shocks

The ZAR is outperforming risk peers despite macro drag. This suggests political developments (GNU) are having a bigger short-term impact than data.

Should the ANC soften its VAT stance and consolidate coalition support, expect USD-ZAR to retest 18.7375 – the lower Fibo bound.

Global Macro & FX Trends

  • USD Index: Below 100, with further downside risk as traders rotate into EUR, JPY, CHF
  • EUR/USD: Bid near 1.1375, eyeing 1.1500 breakout on ECB dovishness
  • GBP/USD: Strong at 1.3250+, profit-taking possible into Easter
  • USD/JPY: Sellers crowding 143.00, momentum weak

Fixed Income & Rates

  • SA Bonds: Holding steady. Market awaits clarity on fiscal reform and GNU stability.
  • Global Yields:
    • UST 10Y: Down to 4.32%
    • Bunds: Rallying, with spread vs UST widening to 182bp
    • ECB expected to cut 25bp today, but guidance is key

Bond Takeaway: The ZAR’s stability could attract inflows post-Easter if:

  • Budget path clears
  • Global risk stabilizes
  • Greylisting progress becomes clearer

FRAs: Quiet, but Dovish Expectations Intact

  • 3X6 FRA: 25bp cuts priced
  • 6X9 FRA: -50bp (Q3)
  • 9X12 & 12X15 FRA: -54bp

Implied policy stance: Two cuts still expected, SARB to tread carefully due to sticky inflation, weak data, and global volatility.

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