President Trump’s policies have challenged the global status quo as expected. True to his word, he has disrupted established norms, prompting countries and regions to reassess their economic frameworks, social policies, and geopolitical alignments. His actions continue to generate significant friction across multiple spheres. South Africa has found itself in Washington’s crosshairs recently, if not for its expropriation laws, then for contrarian geopolitical positions. The latest on that front is that Texas senator and member of the Senate Foreign Relations Committee, Ted Cruz, lashed out at South Africa over its position on Taiwan. He said SA is going out of its way to alienate the US after the government asked the Taiwanese embassy to relocate outside of Pretoria. “I intend to use my position as the chairman of the Africa subcommittee on the Senate Foreign Relations Committee to investigate these and other concerning decisions by South Africa,” Cruz added.

While SA fights to keep investor sentiment towards it positive, the best it can do is look after what it can control and focus on rapidly implementing deep-rooted reforms that might help unleash GDP growth in SA. President Ramaphosa will have a platform to communicate any such reforms today during the State of the Nation Address (SONA). Traditionally, the SONA has not been much of a market-mover, as it has lacked credible ideas that do not include heavier government intervention to solve the many crises that the country faces. However, things may be different this time around. Unlike in previous years, when Ramaphosa used this platform to highlight the achievements of the ANC-led government, he will now be speaking on behalf of the GNU. His focus will likely be on the broad reform agenda currently underway—critical to securing South Africa’s removal from the FATF grey list, restoring fiscal stability, and creating conditions for increased private sector investment to support economic recovery. As a result, this SONA may depart from the usual political rhetoric and offer more substantive insights.

ZAR Markets

The ZAR continued its strong performance yesterday, recovering further against the USD. This rebound has been largely driven by the broad-based depreciation of the trade-weighted USD as markets shift away from the overvalued greenback. This is occurring amid easing concerns over a global trade war after China’s reconciliatory response to US tariffs. The USD has now retreated to levels last seen before Trump’s tariff announcements, providing some relief to more marginal emerging market currencies, including the ZAR. Looking ahead, attention turns to the SONA today and the guidance President Ramaphosa will provide to investors. Although the SONA has not traditionally been a market-mover, there is a slight chance that this time could be different given that President Ramaphosa will be representing the GNU, rather than the ANC today.

Global FX Markets

The USD Index is consolidating above 107.60 this morning. There is an uneasy calm in the FX markets following Monday’s tariff induced volatility which sent many currencies to fresh 2025 lows against the greenback. Watch for a break of 107.50 before adding to any short dollar positions. The EUR/USD has consolidated this morning in the Asian session with tariff threats from the US towards the EU fading somewhat into the background for now. The single currency is anchored around the EUR/USD1.0400 mark as we head into the EU open with investors now focusing on key US data coming out in the latter part of the week. First line resistance can be found at EUR/USD1.0438, which if broken does open the door for a move towards EUR/USD1.0500. The British pound rose to a one-month high on Wednesday as the U.S. dollar weakened following its surge earlier in the week due to U.S. tariff threats. Economists and British officials are optimistic that the UK may avoid the worst of President Donald Trump’s tariff measures due to a more balanced trade relationship with the U.S. Sterling traders are now focused on the Bank of England’s upcoming rate decision today.  USD/JPY has sunk again this morning in Asia following comments by BoJ board member Tamura that the bank must raise short-term borrowing rates by at least 1% by the second half of the fiscal 2025 year to contain upside inflation. The USD/JPY has hit an intra-day low of USD/JPY151.79 which will be the target for yen bulls as the EU session gets underway.