Today, the local data card will be headlined by February retail sales numbers. Recall that South Africa’s retail sales grew by an impressive 7.0% y/y in January, improving from December’s growth of 3.2% y/y. January’s performance marked the eleventh consecutive month of growth in retail sales. The retail sector is re-establishing its eminent pre-CV 19 position of being SA’s only growing industry, easily outperforming the industrial sectors. The improvement in retail sales is mainly attributed to improved consumer confidence, strong growth in real wages, two-pot retirement withdrawals and low price increases (inflation). Notably, the performance of retail growth is not driven by a surge of new consumer credit. Looking ahead, the strong performance of retail sales is likely to continue in February as the spending effect of two-pot withdrawals remains in place.

Globally, US retail sales data will headline the card today, and are expected to surge 1.4% m/m in March, up from a disappointing 0.2% m/m the month prior. Retail sales rose by less than expected in February, and January’s reading was revised down to mark the biggest drop since July 2021. These figures pointed to weak spending on goods, stoking caution as signs of financial stress mount amid risks of an escalating trade war sparked by US President Donald Trump. While seven of the thirteen categories contributing to February’s disappointment posted declines, most notably motor vehicles, which fell -0.4% m/m, more data will be needed to determine whether this downturn reflects weakening consumer sentiment or temporary disruptions. However, following Trump’s announcement of a 25% tariff on imported autos and parts, March’s reading is expected to see a temporary boost. Additionally, a softer-than-expected CPI reading of 2.4% y/y in March may also have offered some temporary relief. March’s reading should thus be interpreted with caution.

ZAR Markets

Global equity markets have rebounded strongly from their lows, with the VIX dropping to 30 from 60 last week. This, coupled with positive news flow around the GNU, have driven a notable recovery in the ZAR. That being said, the ZAR’s recovery stalled yesterday, and downside momentum has dissipated for now. Should more constructive news flow emerge, the ZAR will regain a tailwind that will likely see it test yesterday’s (USD-ZAR) lows at 18.7400 in the near term. Conversely, the pair’s previous high at 19.2300 is expected to cap further ZAR depreciation, while the prior high at 18.9100 now acts as support, likely limiting today’s trading range.

Global FX Markets

Foreign-exchange traders are adjusting their strategies to bet on a weaker U.S. dollar following its significant drop last week, driven by fears of a global trade war impacting U.S. economic growth. Traders are favouring bullish options on the yen and euro against the dollar, incorporating barrier levels like reverse knock-outs and early knock-outs to reduce costs and benefit from gradual currency appreciation. These options expire if the barrier is hit within a set period, suiting expectations of a slow dollar decline. Interest is strong in one- to three-month euro-dollar trades, with euro call options seeing double the volume of bearish puts. The shift follows a 2.4% drop in a Bloomberg dollar strength index, the largest since 2022, amid ongoing tariff policy updates from the Trump administration and retaliatory moves by countries like China. Leveraged funds also hold their largest bullish yen position since January 2021.