The United States is contemplating targeted sanctions against some South African political figures, marking a significant shift in policy not seen since the apartheid era. Joel Pollak, a close ally of President Trump and a potential candidate for the next US ambassador to South Africa, confirmed that Washington is deliberating actions against individuals linked to corruption or policies deemed contrary to US values. This development comes amid deteriorating relations between the two nations. Tensions have been fuelled by Trump’s decision to cut financial aid to Pretoria, citing anti-white legislation and South Africa’s foreign policy. Secretary of State Marco Rubio has further escalated matters by expelling South Africa’s ambassador, Ebrahim Rasool, following controversial remarks recently. As diplomatic strains persist, Pollak indicated the US might withhold appointing an ambassador to Pretoria unless relations improve.
On the economic front, it’s set to be a more quiet week than last with PPI data headlining a weekly card that includes leading indicator stats, the BER consumer confidence index, non-farm payrolls numbers, and the monthly budget balance. Accordingly, the upcoming week will prompt deeper reflection as domestic attention turns to the parliamentary budget debate, arguably the week’s most notable event. With CPI data released and the SARB’s decision set for six weeks, the PPI data carries less weight. The budget’s outcome and its impact on fiscal risk, reflected in South Africa’s yield curve, will shape market sentiment. Elevated fiscal risks could pressure the ZAR, and vice versa. Investors are eager for resistance to VAT hikes, favouring efficient cost-cutting and a leaner government. However, with the ANC leading the GNU, such an outcome, though ideal, remains improbable.
ZAR Markets
Although the ZAR lost some recovery momentum as last week progressed, its broader trend from levels above R19.0000/$ in January remains intact. However, as highlighted last week, the USD-ZAR is caught between two trends. There has been a longer-term uptrend since September last year, which remains intact despite signs of it breaking down in January, when the shorter-term downtrend emerged. The pair is now trading near the diagonal support lines of both these trends, meaning one of them may break down in the coming weeks. For both trends to hold up, the pair needs to trade lower in the coming days and drift back towards 18.1000. Should the market break lower towards the 18 handle, however, the uptrend will break down. This suggests the balance of risks is for the pair to consolidate with some downside drift today.
Global FX Markets
The U.S. dollar hovered just below a three-week high against major currencies on Monday, with the USD index holding north of 104.00 after reaching 104.22 on Friday, its highest since March 7. Traders are cautious as they await details on President Donald Trump’s next round of “reciprocal tariffs,” due on April 2, which have shifted from expectations of broad pro-growth policies to fears of a recession due to aggressive trade measures. Despite a 0.4% weekly gain, the dollar has faced pressure this year amid trade policy uncertainties. The euro rose 0.24% to $1.0836 after hitting a three-week low of $1.0795, buoyed earlier by Germany’s fiscal loosening but retreating as spending impacts appear delayed. The yen weakened 0.3% to 149.77 against the dollar, influenced by a rise in U.S. 10-year Treasury yields to 4.2770%. Sterling edged up 0.15% to $1.2934, and the Australian dollar gained 0.29% to $0.6291 at the time of writing.