Daily Market Report – 22 Apr 2025
ZAR Gains Momentum as USD Weakens Under Political Fire
This Week’s Key Themes
Global: USD Buckles Under Political Pressure
- Trump lashes out at Fed Chair Powell, calling him a “loser” and blaming the Fed for not easing monetary policy.
- Markets interpret this as a threat to Fed independence, triggering a sell-off in US equities and a further decline in the USD.
- Fed funds futures now price in up to four rate cuts in 2025, while long-end UST yields rise, leading to a steepening of the yield curve.
South Africa: GNU Calm and Commodity Tailwinds Support ZAR
- ZAR gains as risk-on sentiment returns globally and domestic politics show signs of compromise.
- SA’s terms of trade continue to improve, especially with gold surging past $3,480/oz.
- CPI and PPI data this week will be critical for SARB watchers, especially given their warning of tariff-driven inflation spillovers.
FX Market Snapshot
ZAR Outlook
- Spot: 18.6600
- Range: 18.40 – 18.7375
- Bias: Bullish, aided by USD weakness, better terms of trade, and GNU optimism
ZAR is no longer a laggard among EM FX. The confluence of a softer USD, booming gold, and political rapprochement makes a retest of 18.40 likely. If CPI softens, that could add fuel.
Global FX Trends
- USD Index: Sub-100 and sliding as investors price political risk
- EUR/USD: Testing 1.1573; next target at 1.1650 if the ECB turns dovish this week
- GBP/USD: Pivoting at 1.3400; technicals suggest further upside but short-term consolidation likely
- USD/JPY: Sellers cap topside near 143.00; test of 140.00 probable
Fixed Income & Policy Watch
Bonds/Yield Curve
- R209 spread vs UST narrows to below 680bp – evidence of improved sentiment
- Outlook: Modestly bullish. If CPI softens and the GNU holds, local bonds will attract yield hunters
Global Bonds
- 10Y UST: 4.403%
- 2Y UST: 3.747%
- Curve steepening reflects rate cut expectations paired with inflation risks
Rates Market Snapshot (FRAs)
| FRA Tenor | Rate Cuts Priced In |
|---|---|
| 3X6 | 18bp |
| 6X9 | 40bp |
| 9X12 | 46bp |
| 12X15 | 47bp |
Expect receiving interest to build as ZAR appreciation + tariff-driven demand weakness globally boost prospects of SARB easing. Two cuts still base case.
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