Today is a big day for local markets, with multiple significant events unfolding. Key economic data, including April’s Consumer Price Index (CPI) and March’s retail sales figures, are set for release, promising a data-heavy day. More importantly, Finance Minister Enoch Godongwana will present the third iteration of the 2025 budget, which is expected to pass smoothly following extensive negotiations that signal a more cohesive Government of National Unity (GNU) willing to embrace compromise. Finally, President Cyril Ramaphosa will meet with US President Donald Trump at the White House to reset bilateral relations. Despite the market-moving potential of these developments, the rand ZAR has strengthened yesterday and overnight, reflecting optimism for positive outcomes across these events.
Perhaps the biggest risk to the rand’s ongoing rally is that the Ramaphosa-Trump meeting doesn’t go as well as is expected. However, President Ramaphosa’s US visit is underpinned by a proactive approach, accompanied by a formidable delegation that includes key ministers and influential business leaders like Johan Rupert, lending significant weight and credibility to the talks. This high-powered team is focussed on mending ties, negotiating a mutually beneficial trade deal, aligning South Africa with global geopolitical initiatives while preserving national sovereignty, and addressing misconceptions surrounding claims of genocide. Trump, meanwhile, will reportedly ask for American companies to be exempted from BEE racial quota laws and for politicians who promote genocidal rhetoric to be loudly condemned.
As for the budget, it holds promise as a transformative shift, moving away from heavy taxation toward reducing government size and debt. It aims to stimulate private sector growth, enhance economic dynamism, and ensure fiscal sustainability. Rating agencies have shown cautious optimism, and the GNU appears to have the political clout to steer South Africa in a positive direction. With the country’s precarious fiscal position, this budget must prioritise a business-friendly, sustainable approach. Amid ongoing negotiations in Washington, the timing is ideal to align South Africa’s fiscal strategy with policies that boost confidence, potentially rethinking measures like BEE, EWC, and NHI.
ZAR Markets
The USD-ZAR has broken below the 18-handle ahead of today’s market-moving events, signalling optimism that the budget, US-SA talks, and (to a lesser extent) the CPI data will yield positive results. A sustained break of this support line will open the door for the rand to continue its recovery, with 17.7193 the next important technical level to target. Of course, the risk exists that these events don’t go as well as expected, which would lead to a retracement of yesterday’s gains. In that scenario, the first point of support for the rand would be its 200-session moving average at 18.2000.
Global FX Markets
The U.S. dollar weakened slightly on Wednesday, continuing a two-day decline against major currencies, driven by President Trump’s struggles to pass his tax bill, which could add $3-5 trillion to U.S. debt. Concerns about a potential U.S. push for a weaker dollar at G7 meetings, stalled trade talks with allies like Japan and South Korea, and ongoing tariff uncertainties further pressured the dollar. Rising U.S. Treasury yields and a Moody’s downgrade of U.S. debt added to a “sell America” sentiment, with markets showing less confidence in U.S. assets as safe havens. Analysts and traders alike noted increased risks from higher interest rates and a poor growth-inflation mix in the U.S. The dollar fell 0.14% against the yen, 0.22% against the Swiss franc, while the euro and sterling saw slight gains. The dollar index dropped 0.03% to 99.938. Federal Reserve officials expressed concerns about Trump’s trade policies, and markets remain cautiously optimistic but await new developments.