In providing feedback from his recent visit to the White House, President Ramaphosa said that he and President Trump had committed to bolstering bilateral trade, increasing mutual investments, and advancing technological collaboration. While Ramaphosa expressed optimism about upcoming trade talks and their potential to foster shared prosperity, he provided little detail on the specifics of the discussions, particularly regarding any concerns raised by Trump or challenges that might complicate negotiations. This lack of transparency leaves questions about how Ramaphosa’s administration plans to address potential sticking points, and whether US-SA relations are any less frosty than they were before Ramaphosa’s visit to the White House.
Other news to take note of on the global stage is that House Republicans narrowly passed President Trump’s sweeping tax bill with a 215-214 vote, now advancing it to the Senate for ratification. However, the bill exacerbates the US budget deficit, prompting investors to reassess their US Treasuries holdings. The Department of Government Efficiency (DOGE) has saved only $170 billion, far from the $1 trillion target, while Congress struggles to cut $2 trillion in expenditure over the next decade. Tariff impositions further dim prospects for economic growth to boost tax revenue. The result is higher Treasury yields, which drive up borrowing costs for home loans, student loans, vehicle finance, and corporate bonds, while straining bank capital reserves. This tightens the credit cycle, potentially necessitating bank recapitalizations and constraining economic growth.
ZAR Markets
The USD-ZAR remains below 18.0000/dlr as the weekend approaches, with charts indicating a forming base but inconclusive technical signals. Historical analysis places the recent ZAR rally in the tail of a bell curve, suggesting an overstretched market overdue for a correction after a prolonged appreciation. The catalyst for this pullback is uncertain, but the ZAR’s vulnerability is heightened, particularly in a Trump administration’s high-risk weekend environment, which may trigger profit-taking. That being said, the USD remains overvalued and vulnerable to further weakness too, which has kept investors from turning more bearish on the ZAR.
Global FX Markets
The U.S. dollar weakened on Friday, marking its first weekly decline in five weeks against the euro and yen, driven by concerns over the U.S.’s $36 trillion debt and President Trump’s tax bill, which could add trillions more. Moody’s recent downgrade of U.S. debt ratings intensified investor focus on fiscal health, prompting a “Sell America” trend. Despite high U.S. Treasury yields, with the 30-year bond near 19-month highs above 5%, the dollar index fell 1.1% for the week. The euro rose 0.21% to $1.1303, and the yen held steady at 143.84, both gaining 1.2% weekly. Japan’s rising inflation and potential rate hike, alongside high Japanese bond yields, added pressure. The Swiss franc also gained 1.2%, while the Australian and New Zealand dollars remained relatively flat.