17 Jan

Daily Market Report 17 Jan

Consolidation Ahead of Trump’s Inauguration

Domestic Developments

  • Infrastructure Focus: SA’s Public Works Minister plans to reallocate R200bn in underutilized funds to close the infrastructure investment gap and boost private sector involvement.
  • WEF Engagement: The government aims to attract foreign investment at the World Economic Forum (WEF) to address economic challenges.
  • Western Cape Cement Plant: PPC and Sinoma sign a deal to construct a R3bn cement plant, signaling infrastructure growth potential.

Global Highlights

  • China GDP: Q4 growth exceeded expectations at 5.4%, driven by effective stimulus measures.
  • US Inflation Data: Softer-than-expected core inflation (3.2% y/y) caused a drop in US Treasury yields, fueling speculation about further Fed rate cuts in 2025.
  • Trump’s Policies: Markets await clarity on Trump’s economic strategies post-inauguration, with cautious trading expected ahead of the weekend.

Market Insight – FX

  • ZAR: The ZAR traded at 18.7900, benefiting from a weaker USD as US Treasury yields declined.

    • Range: 18.6650/9100.
    • Investors are wary of Trump’s economic stance, causing limited directional momentum.

  • USD: The USD index hovered near 109.00, impacted by lower Treasury yields and expectations of further monetary easing.

    • EUR/USD: Strengthened toward 1.0300.
    • GBP/USD: Stable near 1.2200 as UK retail sales data is awaited.

Market Insight – Fixed Income

  • US Treasuries: Yields fell as Fed Governor Christopher Waller hinted at multiple rate cuts in 2025, with the 10-year yield dropping to 4.592%.
  • SA Bonds: Consolidation ahead of key events, with rate cut expectations narrowing:
    • 1X4 FRA: -18bp (less confident of immediate cuts).
    • 3X6 FRA: -25bp (Q1 cut likely).

Outlook

  • SA Policy Watch: Investors await the State of the Nation Address and February Budget for guidance on reforms and fiscal strategies.
  • Global Focus: Trump’s policies and US Treasury movements will dominate sentiment in the short term, with limited market activity expected until after his inauguration.

 

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