Daily Market Report 20 Mar

Daily Market Report – 20 March 2025

SARB Holds Rates Steady as Market Awaits Fiscal Clarity

Key Developments

SARB likely to keep Repo Rate at 7.25%, Maintains Cautious Stance

  • SARB is likely to leave rates unchanged, reinforcing its commitment to price stability amid global and local uncertainties.
  • Inflation remains low at 3.2% y/y, but potential risks—including a VAT increase, higher electricity tariffs, and EM currency volatility—mean the MPC remains cautious.
  • SA’s strong retail sales (7.0% y/y in January) suggest consumer resilience, but structural economic constraints persist.
  • Fed’s steady rate stance and cautious guidance influence SARB’s decision, reinforcing a wait-and-see approach.

Treasury’s Independent Unit Identifies R12bn in Annual Savings

  • Government can save R12bn annually by cutting inefficient projects, according to a new Treasury report.
  • If implemented, these savings could offset the need for tax hikes—but political hurdles remain.
  • Uncertainty over the final budget continues to weigh on market sentiment.

Ford Warns SA Logistics Crisis Threatens Motor Industry

  • Persistent rail bottlenecks and port inefficiencies are crippling SA’s auto exports.
  • Logistical challenges threaten SA’s key auto sector, potentially impacting GDP and employment.
  • SA urgently needs infrastructure investment to remain competitive in global supply chains.

Mining Minister Attacks Environmental Lobbies Over Oil & Gas

  • Minister blames environmental groups for delaying crucial energy projects.
  • Energy security vs. environmental concerns remains a contentious policy battle.
  • If SA accelerates gas projects, it could reduce reliance on costly fuel imports and ease inflation pressures.

Fed Holds Rates, Cuts Growth Forecasts, Raises Inflation Outlook

  • US Fed leaves rates at 5.25%-5.50%, lowers growth projections amid Trump’s tariffs.
  • Inflation expectations rise, reinforcing higher-for-longer policy guidance.
  • Fed signals two 25bp cuts in 2025, but warns of uncertainty.

Market Insight – FX

ZAR Holds Near 18.1000 as SARB’s Decision Supports Stability

  • ZAR remains steady despite political uncertainty.
  • Key drivers:
    1. Gold price surge above $3,000/oz—strengthening SA’s trade position.
    2. Fed’s cautious stance keeps USD under pressure, benefiting EM currencies.
    3. SARB’s reluctance to cut rates reinforces ZAR carry trade appeal.

Short-Term Outlook:

  • If SARB remains cautious and global risk appetite holds, ZAR could test 18.0000.
  • Further upside pressure possible if USD stabilizes and risk sentiment deteriorates.

Key Levels:

  • Support: 17.9700
  • Resistance: 18.2875

Spot at time of writing: 18.1000
Range for the day: 17.97 – 18.2875

Market Insight – Bonds & Interest Rates

SA Bonds Hold Gains Following SARB’s Decision

  • SARB’s steady rates and high yield differentials keep bonds attractive.
  • R209 yield remains near 10.85%, with bond markets focusing on fiscal risks.

FRAs & Rate Expectations

  • 3X6 FRA: 25bp rate cut priced in.
  • 6X9 FRA: 30bp cut for Q3.
  • 9X12 FRA: 32bp cut.
  • 12X15 FRA: 32bp cut.

Key Risks:

  • SA’s fiscal uncertainty continues to keep bond yields elevated.
  • If VAT hike is rejected, bond yields could moderate slightly.

Global Macro Factors at Play

Gold at $3,000/oz Boosts SA’s Trade Position

  • China & India’s central banks continue aggressive gold buying.
  • SA’s mining sector may benefit from higher export revenues.

Fed’s “Higher for Longer” Policy

  • Two rate cuts expected in 2025, but inflation risks remain.
  • If Fed remains hawkish, USD strength could cap ZAR gains.

Trump’s Tariffs & Global Growth Risks

  • Trade tensions continue to pressure risk sentiment.
  • If global stock markets decline sharply, risk aversion could impact ZAR.

Oil & Energy Policy

  • Russia-Ukraine ceasefire helps stabilize oil markets.
  • SA’s domestic energy policy remains uncertain, with tensions over new gas exploration projects.

Final Thoughts: What’s Next?

SARB Delays Rate Cuts, Keeping ZAR Supported

  • Carry trade appeal remains strong—higher rates discourage ZAR depreciation.
  • ZAR’s resilience depends on budget clarity and global risk sentiment.

Gold & USD Key to ZAR Direction

  • Gold above $3,000/oz supports ZAR, but USD stability remains a wildcard.
  • If Fed signals deeper rate cuts later this year, USD could weaken further—boosting ZAR.

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