Daily Market Report 27 May

Daily Market Report – 27 May 2025

SA Reconnects with the US: Symbolic Wins, Structural Hurdles Remain

Key Outcomes

  • G20 Attendance Secured: President Trump will attend the G20 in SA — a symbolic thawing of frosty relations.
  • Starlink Breakthrough: BBBEE concessions in the works for satellite firms — allowing broader rural internet access and bolstering investor perception.
  • Crime Highlighted as Priority: US pressure forced crime onto SA’s reform agenda, which may attract international support but also scrutiny.

MPC Watch: Rate Cut or Not?

Argument In Favour of Cut Against Cut
Inflation             3 months < 3% CPI              Low inflation already priced in
Growth             GDP revised to 1.4%              Rebound from reform potential
ZAR             Strong, stable FX helps              Already appreciated significantly
Target Shift             Transition to 3% expected              SARB may wait to announce formally

ZAR: Technically Overbought, Fundamentally Supported

Metric Value
Spot 17.8750
Support 17.7900
Resistance 17.9865
Bias Consolidation / mild correction risk

FX Drivers

  • USD Fragility: DXY < 99.00; bearish momentum remains
  • Improved Sentiment: US-SA diplomacy thaw + LNG-auto deal proposal
  • SARB Positioning: If the SARB holds or lowers with hawkish tone, ZAR likely stays <18.0000
  • External Risk: A global equity wobble or VIX spike could prompt a ZAR correction to 18.20–18.60

Bond Market & FRA Trends

Vanilla Auction Today

  • R2035, R2040, R2053 on offer
  • Focus: Long-end pricing to gauge fiscal stress sentiment

FRA Pricing (Rate Cut Expectations)

FRA Tenor Implied Cut
2×5 –25bp
3×6 34bp
6×9 45bp
9×12 47bp
12×15 48bp

Global Risk Landscape

Fiscal Debt Tipping Point

  • BIS’ Carstens: “We are at the limits of fiscal comfort.”
  • Japan’s 40-year bond auction disaster. US 20Y auction weak. Gilt yields elevated.
  • Term premiums rising = investors demand more yield to hold debt = long-term fiscal squeeze

Rotating FX Themes

  • “Sell America” trade growing.
  • EUR/USD eyeing 1.1424 resistance — a breakout triggers a new USD leg lower.
  • GBP/USD >1.35 — highest since 2021, supported by strong UK data.

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