The flow of local economic data will resume after the Easter holiday, with the February edition of the SARB’s leading indicator scheduled for release today. Recall the forward-looking indicator improved for a tenth consecutive month in January to 114.4 from 113.3 in December. February’s print could well reflect further growth, still reflective of the improvement seen in other broader short-term conditions, such as low inflation, lower interest rates, a somewhat stable electricity supply, and high gold prices. Unfortunately, there are signals emerging that the consumer spending that has boosted the retail and automotive sectors is fading as two-pot withdrawals are run down. This slowdown, which we are already seeing in our in-house leading business conditions index, will start to reflect in a weaker SARB leading indicator over the next few months.
Looking externally, it is worth noting that market sentiment deteriorated over the weekend after President Trump intensified his verbal attacks on Federal Reserve Chairman Powell, labelling him “Mr too late” and a “major loser” on Truth Social. Trump’s pressure on the Fed to cut rates aims to counter the economic fallout from his tariff policies, which he claims have not driven inflation. Powell, emphasising the Fed’s independence, is likely to resist, while Trump explores options to remove him from his post (which would have little effect on the rest of the Board of Governors’ interest rate decision-making). Investors, viewing Trump’s remarks as an attack on Fed autonomy, reacted negatively, fearing political interference in monetary policy even as this may lead to lower interest rates in the near term. Trump’s criticism, intended to spur economic relief, has instead destabilised markets at the margin, increasing volatility and eroding confidence at a time when steady policy is critical amid global trade uncertainty.
ZAR Markets
The rand continues to capitalise on a broadly weaker USD as the market grows more comfortable with each passing day that the GNU might survive the still-ongoing budget impasse. The USD-ZAR pair has broken through the 61.8% Fibo retracement level of its early-April uptrend, opening the door for a slide towards its 50-day moving average at 18.5716. The latest catalyst was Trump’s criticism of the Fed as he piles pressure on Chairman Powell to lower interest rates. The USD index (DXY) has now broken comfortably below the 100 level and looks set to depreciate further from a very overvalued position. These are the weakest levels since early 2022, and given the prospects for the US economy and its fading exceptionalism, the USD is losing its carry appeal. All that to say that the ZAR looks set to trade back towards the 18-handle in the coming weeks, although likely not without bouts of significant volatility.
Global FX Markets
The U.S. dollar weakened to near a three-year low on Tuesday, approaching a decade-low against the Swiss franc and a 3.5-year low against the euro, driven by President Donald Trump’s persistent attacks on Federal Reserve Chair Jerome Powell. Trump intensified his criticism in a Truth Social post, labeling Powell a “major loser” and demanding immediate interest rate cuts to prevent an economic slowdown. This follows Powell’s stance that rate cuts should wait until the inflationary impact of Trump’s tariff plans is clearer. White House adviser Kevin Hassett indicated ongoing discussions about potentially firing Powell, raising fears of a challenge to the Fed’s independence. These tensions, combined with escalating U.S.-China trade disputes—highlighted by China’s accusations of U.S. tariff abuse—have deepened investor concerns, fostering anxiety about economic stability and further pressuring the dollar. The USD Index is holding around the 98.20 mark as the London open beckons.