The USD is at its highest REER overvaluation since the 1980s, but depreciation depends on weaker US data, challenging the exceptionalism narrative. Some indicators softened, highlighting economic risks. The ZAR, meanwhile, remains slightly undervalued but will likely remain rangebound until the Budget in March, with hopes for fiscal reforms to improve stability.

In terms of global markets, rising uncertainty has weakened risk appetite, prompting a US stock sell-off. US growth faces structural risks, with excessive borrowing and Fed tightening exposing economic fragility. Market volatility could force a dovish Fed shift, but until then, the ZAR may recover – contingent on the stock market’s trajectory.