The DA has declared a dispute within the GNU, citing frustrations with the ANC over adherence to coalition agreements. This follows President Cyril Ramaphosa’s approval of a new land expropriation law last week, enabling the state to expropriate land in the public interest with equitable compensation. Further straining the coalition is the contentious NHI Act signed last year. Opponents, including the DA, argue it limits healthcare choices, undermines patients’ rights, and raises concerns about state capacity to manage such a system. Then there is also the BELA bill, parts of which the DA rejected as it gives the government excessive powers to determine language policy and admission criteria at state schools.

These escalating disputes highlight growing fractures within the coalition government, raising concerns about its stability and its ability to address South Africa’s economic and social challenges effectively.. South Africa’s economy cannot afford factors that diminish its appeal as an investment destination, and ongoing ideological tensions within the GNU’s major parties do exactly that. To that point, DA leader John Steenhuisen, invoking clause 19 of the coalition agreement, called for a reset in coalition relations and cautioned that the party may reconsider its participation if it cannot fulfil its mandate

ZAR Markets

The ZAR has started the new week off on the back foot, trading back around R18.5500/$ after testing levels closer to R18.4000/$ on Friday. Market risk sentiment deteriorated after US President Trump reminded investors of the credibility of his tariff threats over the weekend by announcing 25% tariffs on Colombia – to be increased to 50% in a week-  after the country rejected two repatriation flights of deported migrants. Colombia quickly responded with retaliatory tariffs on US imports, before agreeing to all of Trump’s terms to end the dispute. Trump’s willingness to deploy tariffs to achieve foreign policy objectives was on full display and raised market concerns over trade policy uncertainty going forward. As the dust settles, the focus will shift back to monetary policy decisions, with the ECB, Fed, and SARB all setting rates this week.

Global FX Markets

Weak U.S. economic data, including a 9-month low in January S&P Global PMI and a downward revision in consumer sentiment and inflation expectations, weighed on the dollar. These economic factors coupled with Trump’s calls for lower rates made the long USD trade a difficult one into the close of last week. EUR/USD surged to a one-month high, with key resistance at the 1.0600/30 zone potentially breaking in the near term as bearish sentiment wanes. This rally is supported by easing trade tensions, economic data disparities, and technical factors. Meanwhile, the Eurozone January PMI returned to growth at 50.2, exceeding estimates. Additionally, narrowing German-U.S. bond yield spreads further reduced the dollar’s advantage over the euro, supporting EUR/USD’s upward momentum. The GBP/USD exchange rate could see further gains if U.S. President Donald Trump’s push for lower U.S. interest rates and softer tariff policies materializes. Sterling recently broke resistance at the 30-day moving average (1.2429) and now targets key levels, including the GBP/USD1.2545 (55-DMA) and GBP/USD.2637 (daily cloud base). Risks to this outlook include upcoming central bank decisions: the Fed on Jan. 29 and the Bank of England (BoE) on Feb. 6. Markets expect the Fed to hold rates steady and an 80% likelihood of a 25bp rate cut by the BoE. Post-decision comments from policymakers will be closely watched for future policy direction. The yen has consolidated at the start of the week following the hike by the BoJ on Friday. The pair has found a floor just ahead of USD/JPY155.00 this morning with large options expiries expected to keep the currency contained in the short term. $1bn at USD/JPY155.00, and $2.1bn between USD/JPY155.95-156.00 roll off today.