Today, the local data card will be headlined by Q1 unemployment numbers. Recall that SA’s official unemployment rate improved to 31.9% in Q4 2024 from 32.1% in Q3 2024. The expanded unemployment rate (including discouraged work seekers) remained at 41.9% in Q4 2024. On a year-to-year basis, labour market statistics were practically unchanged as the unemployment rate was down only -0.2% compared to Q4 2023. However, employment and labour force participation rates improved over the same period. Still, SA’s unemployment rate remains near the highest globally due to the structural headwinds that years of poor governance have created. Regarding this week’s print, while Q1 typically sees a rise in unemployment after festive hiring in Q4, this could be offset by the short-term economic improvement that continued into early 2025. The broader trend will remain one of rising unemployment until stronger economic growth is realised.
Externally, the spotlight will be on US CPI data. Consumer inflation is expected to hold steady at 2.4% year-over-year, suggesting that overall price pressures remain contained for now. Underlying forces appear balanced, with lower energy prices helping to offset persistent shelter and services inflation. That said, risks are mounting as potential tariff hikes could lift import costs, while a slowing global economy and heightened geopolitical tensions threaten to disrupt commodity markets. As a result, inflation could remain near current levels in the near term, with limited scope for a meaningful decline. This would support the view that the Federal Reserve will stick to a gradual easing path, although stickier costs could weigh on consumer spending momentum.
ZAR Markets
The USD-ZAR market rejected lower levels yesterday, trading back towards the ceiling of its recent range centered around the 200-day moving average at 18.2056. While this, and the broader trade pattern, suggests that the pair has bottomed out and is ripe for a recovery, it is converging back on the 200-day moving average this morning. As signs continue to emerge that the GNU is holding together and that it will successfully pass a budget later this month, the rand is trading with a degree of resilience against a broadly-firmer dollar that is finding support in easing global trade tensions. All in all, the USD-ZAR’s pivot around the 200-day moving average will likely continue for a while longer, at least until a stronger catalyst arrives to provide fresh directional impetus.
Global FX Markets
The U.S. dollar held on its gains this morning in Asia, driven by optimism over a U.S.-China trade deal that paused massive tariffs for 90 days, easing fears of a global recession. The agreement, announced on Monday, sparked a relief rally in global stock markets and bolstered the dollar, which hit a one-month high against a basket of currencies at 101.67. The yen and euro weakened significantly, with the dollar up 2.1% and 1.6% against them respectively on Monday, though it later dipped slightly to 148.29 yen and 0.8448 Swiss franc. The euro recovered marginally to $1.1095. Analysts noted the deal exceeded market expectations, suggesting U.S. sensitivity to tariff impacts and a partial policy retreat. Reduced trade tensions led traders to scale back expectations of Federal Reserve rate cuts, with only 56 basis points of cuts priced in by December.