President Ramaphosa’s surprise cabinet reshuffle has sparked a fierce backlash from the Democratic Alliance (DA), placing South Africa’s Government of National Unity (GNU) at risk. The removal of DA’s Andrew Whitfield from his deputy trade minister post was met with strong condemnation. DA leader John Steenhuisen accused the President of undermining the GNU and issued a 48-hour ultimatum for Ramaphosa to dismiss several ministers linked to corruption.

Market sentiment quickly deteriorated, sending the rand weaker and rattling bond markets amid fears of political instability.

ZAR Under Pressure Despite Global USD Weakness

The rand (ZAR) depreciated to 17.8775/USD as domestic political drama overshadowed global USD softness. The lack of consultation around the cabinet change within the GNU framework has raised investor concerns over governance credibility and continuity. While the DA did not sabotage the crucial division of revenue vote, analysts warn that further fallout could push the ZAR to retest the 17.9850 resistance zone.

Bond Market Wary as GNU Discord Fuels Risk-Off Sentiment

Our government bonds, which have recently performed well, may face renewed pressure as uncertainty clouds the GNU’s future. The reshuffle, viewed by some as politically reckless, threatens investor confidence and could cap any further gains in local debt markets. Friday’s inflation-linked bond (ILB) auction will be closely watched for signals on inflation expectations and risk appetite amid mounting volatility.

Meanwhile, the FRA market reflects expectations of just one 25bps SARB rate cut in H2 2025. The probability of a second cut is dwindling, given SARB’s cautious stance and an inflation target of 3%.

Global Markets Eye US PCE and Trade Developments

Globally, focus has shifted to Friday’s release of the US PCE inflation data. A softer-than-expected print could reinforce expectations for Federal Reserve rate cuts. Simultaneously, investors are watching a finalised US-China trade agreement that promises rare earth supplies in exchange for reduced US countermeasures. President Trump’s July 9 deadline for broader trade deals looms large.

US GDP data showed a downward revision to -0.5% in Q1, while jobless claims continue to suggest labour market softening. This builds the case for Fed easing, though policymakers remain cautious amid sticky inflation in some sectors.

Commodities: Oil Drops, Copper Surges, Gold Weakens

• Oil: Brent crude fell over 12% on the week, its steepest decline in two years, after the Israel-Iran ceasefire reduced geopolitical risk premiums. Brent hovered near $68, while WTI was around $65.
• Gold: The precious metal lost 1.5% for the week, pressured by revived risk appetite and declining demand for safe havens.
• Copper: Prices surged 2.8% this week, the strongest move since April, amid a tightening squeeze on the London Metal Exchange, with spot contracts spiking on shrinking inventories and US tariff-related demand.
• Platinum & Palladium: Platinum gained over 11% this week, hitting decade highs, while palladium rose 8%, supported by speculative flows and industrial demand.

Macro Outlook: Disconnect Between Markets and Economy Widens

Despite softening growth and looming geopolitical risks, global stock markets remain buoyant, an enigma that analysts attribute to remaining pandemic-era savings, belief in central bank intervention, and optimism about a soft landing.

This disconnect raises questions about the sustainability of the rally, especially as monetary stimulus fades and inflation remains mixed across regions.