Daily Market Report – 4 Apr 2025

ZAR Holds as USD Slides, Despite GNU Fracture

Markets Roil Under Trump Tariffs, but USD Weakness Shields the ZAR… For Now

1. Trump’s Trade War Shakes Markets

• Trump’s blanket 30%+ tariff regime is triggering global economic whiplash, with the JSE losing R1 trillion, and Wall Street futures pointing to further carnage.
• The VIX volatility index surged past 30, and the US 10-year yield broke below 4% for the first time since October 2024, now targeting 3.50% in a technical head-and-shoulders pattern.

2. ZAR Under Local & Global Crossfire

• Domestic turmoil: The GNU fractures, the DA heads to court, and uncertainty reigns about the sustainability of the fiscal framework.
• Global dislocation: Risk-off flows, tariff fallout, and an accelerating recession narrative have decimated equities. But surprisingly, the USD is falling, and gold is surging, which supports the ZAR.

Market Insight – FX

• Spot: 18.7600
• Range: 18.6250 – 19.0450
• ZAR has stabilised despite intense global and domestic headwinds.

Drivers:

• Weaker USD: The safe-haven move is bypassing the dollar in favor of yen, gold, and CHF.
• ZAR finds relief as SA’s export value rises with gold, and the USD index plunges below 102.
• Local politics: The DA’s opposition and court challenge have fractured the GNU, but the ANC is scrambling to show that budget amendments and spending cuts are still possible without VAT hikes.

While the ZAR should have collapsed past 19.00+, the weak USD, strong gold, and high SA bond yields (attracting capital) are providing a short-term buffer.

Bond Market Snapshot – Diverging Forces

• R209 yield: Surges above 11% earlier, now stabilising.
• US 10Y yield: Plunges to sub-4.00%, on course for 3.50% if the stock correction deepens.
• SA-US yield spread: Above 700bp, one of the most attractive EM carry trades globally.

Drivers:

• Local fiscal chaos: Budget passage without GNU unity is troubling.
• Tariff shockwaves: Global bond markets are pricing in stagflation-lite and recession-heavy.
• SARB on edge: With the ZAR stabilising, further inflation pass-through may be capped, but political uncertainty prevents a dovish pivot.

Local bonds should attract inflows long term, but short-term volatility will keep foreign investors hesitant. The irony? Fiscal pain may enforce better long-term discipline.

FRA Curve – Cut Hopes Rebalanced

• FRA curve reflects a holding pattern, waiting on SARB guidance and US NFP data today.
• Markets remain torn between inflation fears and the deepening growth gloom.

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