Daily Market Report 7 Mar

Daily Market Report – 7 March 2025

US payroll data and Trump’s shifting tariff stance

Key Takeaways from the Market

  1. ZAR Strength Continues:

    The South African Rand is benefiting from both a weaker USD and a narrowing current account deficit. With the US exceptionalism narrative fading, there’s a growing probability that USD-ZAR could test the 18.0000 handle—especially if the US jobs data disappoints today.

  2. US Payroll Data Crucial:
    • Expectations: +160k jobs, unemployment steady at 4.0%.
    • Risks: If job growth disappoints, markets will price in more Fed rate cuts (currently three cuts expected in 2025).
    • Weaker US jobs data = Lower bond yields = Weaker USD = Stronger ZAR.
  3. Trump’s Tariff Strategy is Evolving:
    • One-month delay on Mexico & Canada auto tariffs signals he’s open to negotiations.
    • Protectionism vs. Economic Growth: If reciprocal tariffs escalate, the global growth outlook deteriorates—which could support safe-haven flows (Gold, Swiss Franc, JPY).
    • Emerging Markets & ZAR: Less tariff pressure means risk appetite remains intact, helping ZAR.
  4. SA Macro Updates:
    • Current Account Deficit Shrinking:
      • -0.4% of GDP in Q4 (from -0.8% prior).
      • This reduces South Africa’s reliance on foreign capital inflows—a ZAR-positive factor.
    • Budget Talk Continues: The GNU coalition is rethinking a smaller VAT hike—which, if balanced with spending cuts, could be positive for fiscal stability.

Market Impact – FX

  • ZAR Outlook:
    • 18.0000 Support in Sight → If US jobs data disappoints, a break below 18.0900 could test 17.8900.
    • Risk to the ZAR → If the US jobs data surprises positively, the USD could stabilize, and ZAR could correct towards 18.2650.
  • USD Outlook:
    • DXY at 4-month lows: Markets pricing in weaker US growth & rate cuts.
    • Payrolls Disappointment? → Would accelerate the USD’s decline.

Market Impact – Bonds & Rates

  • US Treasury Yields Falling:
    • 10yr UST now at 4.14% (from 4.80%) → Markets pricing in a US slowdown.
    • Fed rate cuts are coming → Bond investors are front-running the move.
  • SA Bonds & Yield Curve:
    • Foreign inflows increasing: R209 spread over US 10-year has widened back to 650bp—attractive for foreign investors.
    • Budget Key for Bonds: If SA commits to fiscal consolidation, expect lower SA bond yields.

What to Watch Next

  • US Payrolls Today (Biggest market mover today)
  • USD-ZAR: 18.0000 Support Test?
  • Trump Tariff Response from Trading Partners
  • SA Budget Discussions – Any strong fiscal reform signals would further boost the ZAR.

Final Thought:

  • A weak US payroll report = ZAR could push towards 18.0000.
  • A strong US payroll report = Some consolidation in USD-ZAR above 18.1000.

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