Daily Market Report 5 Feb

Daily Market Report 5 Feb

ZAR Stabilizes as Focus Shifts to SONA & US Trade Policy

Key Developments

  • SA Responds to US Concerns
    • Ramaphosa meets Musk & US officials to clarify SA’s stance on land expropriation.
    • SA government reassures that land expropriation laws won’t lead to arbitrary seizures.
    • Health Minister engages with US over potential aid withdrawal for HIV/AIDS programs.
  • China Retaliates Against US Tariffs
    • China imposes 15% tariffs on US imports in response to Trump’s trade actions.
    • US delays 25% tariffs on Mexico & Canada for 30 days, securing concessions.
  • Upcoming SONA: A Key Test for the GNU
    • Investors expect clarity on economic reforms & SA’s approach to structural challenges.
    • SONA’s messaging will influence ZAR sentiment, as markets seek political stability.

Market Insight – FX

  • ZAR Performance
    • Spot: 18.6950 | Range: 18.4175 – 18.8650
    • ZAR cautiously tracking USD, with sentiment improving as trade risks ease.
    • Stronger SONA messaging could boost confidence, further supporting the ZAR.
    • Key resistance at 18.8650, while support at 18.4175 could hold downside moves.
  • Global FX Trends
    • USD Index weaker for the third session, but still above key 107.50 support.
    • EUR/USD struggles amid weak Eurozone PMI (46.6) vs US (50.9), reinforcing rate cut expectations.
    • GBP/USD stable as UK trade exposure to US tariffs remains low.
    • USD/JPY drops below 153.00, as strong wage data boosts rate hike bets for the BOJ.

Market Insight – Fixed Income

  • US Treasuries & Global Bonds
    • 10-year yield drops to 4.515%, reflecting concerns over US trade policy uncertainty.
    • China’s tariffs raise fears of prolonged tensions, driving risk-off sentiment in bonds.
    • Fed rate cut expectations rise, with markets now pricing in nearly two 25bp cuts by mid-year.
  • SA Bonds & FRAs
    • SA bonds hold steady, awaiting SONA & Budget 2025 for fiscal clarity.
    • No further SARB rate cuts priced in for 2025, as inflation risks remain.
    • Investors focus on fiscal discipline & economic reform messaging from the GNU.

Outlook

  • ZAR sentiment hinges on SONA & US-China trade war developments.
  • Stronger messaging on reforms & fiscal discipline could support SA assets.
  • Investors remain cautious, with global trade tensions keeping risk appetite subdued.
  • Bond markets stable, but fiscal credibility will be key to long-term confidence.

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