Daily Market Report – 24 Apr 2025
GNU Gets a Boost, VAT Hike Scrapped, and Tariff Tensions Ease
Major Policy Reversals Spark Market Relief
US:
Trump’s tariff reversal on China (cutting rates to 50–65%) signals that the US is backtracking under pressure. Treasury Secretary Bessent’s framing of it as an “opportunity” hasn’t fooled markets. Investors see this as a win for economic rationality over protectionist dogma.
SA:
Finance Minister backtracks on VAT hike, signaling a meaningful shift towards fiscal reform after pressure from GNU coalition members, opposition parties, and voters. This is a political and market-positive development that raises the probability the GNU survives and may even thrive.
IMF Warns SA Budget Fails to Stabilise Debt
The IMF’s fiscal monitor now sees SA’s debt rising to 88% of GDP by 2030 unless drastic action is taken. The message: cut fat, not raise taxes. Simply put, the government needs to shrink and reform, or risk spiraling debt and credit downgrades.
Inflation Surprises to the Downside
Softer CPI figures this week raise expectations that SARB will cut rates, possibly starting in May. Coupled with ZAR strength and improved terms of trade, this opens a window for a rate-friendly cycle, barring any fiscal or geopolitical shocks.
ZAR Market Insight
| Metric | Value |
|---|---|
| Spot | 18.6500 |
| Range | 18.40 – 18.7375 |
- The ZAR has held gains, and traders have now largely priced out the GNU breakup risk.
- While the USD staged a modest rebound on tariff de-escalation, the structural trend favours ZAR as USD exceptionalism unravels.
Global FX Trends
- USD Index: Stabilised near 99.50 but vulnerable; Monday’s 97.92 remains key support.
- EUR/USD: Volatility drives demand for options over cash positions. Buy-the-dip sentiment persists.
- GBP/USD: Pausing near 1.3300; potential for consolidation before further upside.
- USD/JPY: Whipsaw trading continues; options now dominate strategies as stops become risky.
Fixed Income & Rates Watch
Bonds
- R209/UST 10Y Spread: ~675bp – still attractive.
- Domestic bonds reacted positively to soft inflation, suggesting space for rate cuts.
- VAT reversal & fiscal reform chatter = major sentiment boost.
- Watch for proof of spending cuts in upcoming budget realignment – otherwise, rally may stall.
FRAs
| FRA Tenor | Cuts Priced In |
|---|---|
| 2X5 | 84% chance of 25bp |
| 3X6 | 25bp |
| 6X9 | -49bp |
| 9X12 | -53bp |
| 12X15 | -54bp |
The FRA curve now reflects at least 2 cuts, and could extend if ZAR strengthens and inflation stays benign.
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