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Money Market FundsThe final weeks of 2025 continue to deliver significant economic signals from the United States, as markets digest the first wave of data released since the record-long government shutdown ended. With visibility gradually returning, a key development is the continued weakening of the U.S. labour market. New hiring data has fallen to a five-year low, amplified by seasonal effects and broader structural slowdown. TreasuryONE’s Head of Risk Management, Vighar Saliha, notes that the deterioration aligns with a trend analysts have anticipated for two years—one that now places increasing pressure on U.S. monetary policy.
The Federal Reserve enters its final policy meeting of 2025 in a difficult position. With employment indicators softening and inflation still running above the 2% target, the central bank faces what Vighar describes as a “rock and a hard place” scenario. Markets have already priced in a 25bps cut with near-total certainty, leaving Chair Jerome Powell’s forward guidance as the true market-moving variable. Analysts expect Powell to take a notably hawkish tone, given the risks of cutting rates into a slowing economy while inflation remains sticky—a combination that edges the U.S. closer to a stagflationary environment.
Beyond interest rates, attention is shifting to the future of quantitative tightening. The Fed has already slowed the process, raising questions about whether persistent labour-market weakness or a potential equity-market correction could prompt a return to quantitative easing in 2026. Nonetheless, because the December rate cut is fully priced in, short-term market reaction is expected to be muted, allowing risk-sensitive currencies like the South African rand a relatively stable trading environment this week.
Domestically, South Africa continues to benefit from supportive external dynamics. Moody’s decision to hold the country’s credit rating steady—despite expectations of a shift to a positive outlook—had little impact on markets, given the broadly improved sentiment following the MTBP, strong commodity prices and the exit from the FATF grey list. With the rand trading just below R17/USD, TreasuryONE notes that the near-term outlook remains constructive, though year-end liquidity constraints could still trigger bouts of volatility. As 2025 winds down, markets remain steady but alert to multiple cross-currents likely to shape an eventful 2026.