On the wires…

• GNU hangs by a thread as ANC and DA wrestle over budget agreement.
• Thembi Simelane paid R700 000 by Eskom contractor that inflated costs, billed for ghost workers.
• ‘All the right credentials’: Analysts back new Capitec CEO even as Fourie exit hits shares.
• ANC slams ‘local right-wing elements’ spreading disinformation in the US.
• Red Cross outraged over killing of eight medics in Gaza.
• Trump says he is “not joking” about third presidential term.

Quote of the day

“The best way to avoid disappointment is to lower your expectations. The best way to avoid regret is to ignore this advice.” –  Gavin Trevor Coope

The indicators…

Currency crackdown…

A jittery GNU is causing all sorts of problems for the rand, with the world waiting for some sort of agreement to be struck. Fiscal uncertainty does not attract foreign investment, and while everything had looked to be moving in the right direction, it looks like the DA and ANC are stuck. John Steenhuisen is due to speak shortly, so let’s see what he comes up with – the rand will be hoping that he is wise enough to avoid sensationalizing anything more than necessary. ZAR depreciated across the board yesterday, on news that the GNU is struggling – particularly against a dollar which has been weak in its own right. US stocks have also continued to tumble, on track for their worst three-month stretch since March 2023. The six largest US banks stocks were all trading lower yesterday as the market endured another large selloff ahead of Trump’s next tariff rollout (Due tomorrow). The overriding fear is that Trump’s tariffs will induce widespread inflation and crimp growth. Although he claims that his tariffs will have the opposite effect, the market is not believing him just yet.

“What the FX market is indicating through spot, options, and positioning is a greater focus on the domestic implications for the US rather than on the countries being targeted with tariffs,”

said analysts at ING, in a note. The dollar is also under pressure from a flight to the safety of US Treasurys, which sent the yield on the 10-year note sliding to 4.19% yesterday. The winner so far has been the euro, which drew strength from some strong German figures. Could we see a shift in central currency away from USD, towards the widely used EUR? There are heaps of US economic data due this week and given the great sensitivity of the greenback to macro figures of late, should instigate further volatility. Key releases of the week include JOLTS openings and ISM manufacturing on Tuesday, ADP payrolls on Wednesday, ISM services on Thursday, and payrolls on Friday.

Despite all dollar uncertainty, the rand is possibly in even worse shape – with the only thing really propping us up being the continued appreciation of gold. Oil prices have also crept higher, where near-term risks are skewed to the upside. US threats of secondary tariffs on Russian and Iranian oil have led market participants to price for the risks of tighter oil supplies. We are set for another topsy-turvy week, let’s just hope that we come out of it with a united GNU – that is bound to bring the rand back.

 On the radar…

Did you know?

In 1620, there was a period where tulips were more valuable than gold.