Daily Market Report 17 Feb

Daily Market Report 17 Feb

ZAR Gains Support Amid Budget Anticipation and USD Weakness

Key Developments

  • South Africa:
    • Budget Week Focus: High anticipation for reforms and fiscal discipline.
    • Healthcare Reform: Medical aids permitted to collaborate on tariff setting.
    • Moody’s Warning: Potential SA economic risks from US-SA trade tensions.
    • CPI Forecast: 3.3% y/y, maintaining a stable inflation outlook for SARB.
  • Global:
    • US-Russia Peace Talks: US pushes for negotiations on Ukraine, boosting EUR.
    • US Retail Sales: Sharp 0.9% drop highlights economic softness.
    • USD Slide: Weak retail data undermines yields and the dollar.
    • Trump’s Reciprocal Tariffs: Tensions rise; France demands EU retaliation.

Market Insight – FX

  • ZAR Performance:
    • Spot: 18.3400 | Range: 18.2650 – 18.6350
    • Gold Rally: Supports ZAR amid strong central bank and investor demand.
    • USD Weakness: Soft US retail data and rising trade war risks weigh on the greenback.
    • Key Support: Break below 18.3000 may trigger a test of 18.2650.
    • Budget Caution: Investors awaiting clarity on fiscal reforms and private-sector inclusion.
  • Global FX Trends:
    • USD Index: 106.60, under pressure from retail sales miss.
    • EUR/USD: 1.0450, boosted by peace talk hopes and yield differential shifts.
    • GBP/USD: 1.2585, highest YTD after unexpected UK GDP growth.
    • USD/JPY: Trades below 151.00, signaling yen strength amid risk-off sentiment.

Market Insight – Fixed Income

  • US Treasuries & Global Bonds:
    • UST Yields Decline: 10-year at 4.48% (-5.3bp) on retail sales shock.
    • Rate Cut Expectations Rise: Markets price in 37bp easing by year-end.
    • Divergent Views: BofA & Deutsche foresee no cuts; Goldman, JPM expect at least two.
  • SA Bonds & FRAs:
    • CPI & Budget Key Drivers: Data and fiscal guidance to set market tone.
    • FRAs Reflect Cautious Easing Outlook:
      • 3X6: 14bp cut priced in.
      • 6X9: 22bp cut priced in (Q3).
      • 9X12: 26bp cut (full rate cut expected).
      • 12X15: 28bp cut (gradual easing expected).

Outlook:

  • ZAR Resilience to Continue: Supported by gold strength and USD weakness.
  • Budget in Focus: Investors seek reforms to stabilize debt and boost private investment.
  • US Policy Uncertainty: Trump’s tariffs may fuel risk aversion and USD volatility.
  • Global Growth Concerns: Weak US data could tilt sentiment towards emerging markets.
  • Key Levels: USD-ZAR break below 18.3000 opens path to 18.2650 support.

Why Choose TreasuryONE?

Minimise the impact of market volatility on your bottom line by getting access to an experienced team of dealers that provides expert market advice – validated by facts and figures, not feelings or hearsay.

We customise risk management strategies to achieve the most competitive rates in a fast-moving and complex marketplace.

We provide effective and measurable processes for managing:

  • Exchange Rate Risk arises when an organisation conducts business in multiple currencies, either through exports and imports, or through foreign operations.
  • Commodity Price Risk is the financial risk posed to an entity’s financial performance and profitability by fluctuations in commodity prices that are primarily driven by external market forces and are therefore beyond the entity’s control.
  • Interest Rate Risk management for companies involves identifying, measuring, and managing the potential impact of changes in interest rates on a company’s financial position and profitability.