The risk-sensitive rand often turns towards global drivers such as the US monetary policy in the absence of major local economic data points. Local investors will be walking a tight rope ahead of the budget announcement today by South Africa’s finance minister.
Today at 14h00 the Finance Minister Enoch Godongwana presents his budget speech. How will the Minister present Tax rebates for Green energy? How will he navigate the tumultuous trade union waters with salary increases? Top of the SOE agenda will be ESKOM and just how a spiraling debt of almost 500 Billion! A year ago, rolling blackouts were sporadic and irritating; today, load shedding is pervasive and intrusive and destroying a tattered economy.
Sin tax increases every year, so it is highly likely that alcohol, especially wine, and spirits, will be a few Cents or Rands higher. The alcohol and tobacco industries reportedly contribute around 10 percent in taxes. According to PwC, the government’s guideline to direct its excise duty policy is 11% (for wine), 23% (for beer), and 36% (for spirits) of the weighted average retail price and 40% of the cost of the most popular brand for cigarettes.
The South African government’s benchmark 2030 bond was a tad weaker in early deals, with the yield up 1.5 basis points to 10.040%
These are the mid rates at 6:50 today:
| USD = R18.25 | AUD = R12.49 |
| GBP = R22.12 | DXY = 104.10 |
| EUR = R19.47 | Brent Crude = $83.11 per barrel |
In International markets, following the last meeting of the FOMC, it seemed like the Fed was putting the final touches on its rate hiking cycle. In the post rate decision presser, Chair Powell said that only a couple of rate hikes remained. Although the market still believed that the Fed would be forced to cut rates at some point in the near future, there was considerable satisfaction that monetary policy was starting to level off.
Two days later, NFP blew that consensus out of the water. The sudden drop in unemployment with a large number of new hires forced a re calibration of when the Fed might actually stop the hiking. Fed officials came out talking about labor tightness being a problem. A couple of weeks later, CPI fell as expected, but not by much. The prior month’s measure was revised higher, and the annual rate was above expected both on the core and headline. Although not out of bounds, it was one more point supporting the narrative that rates could keep going up more than the market expects.
The pound soared as traders increased bets on Bank of England rate hikes after British companies unexpectedly reported the first growth in seven months. Sterling rose as much as 0.6% to $1.2119, leading gains among the world’s major currencies on Tuesday, after an S&P Global survey of purchasing managers also showed a “sustained increase” in prices. The data prompted traders to fully price a quarter-point hike at the UK central bank’s next meeting and to up the expected peak rate. “The upside surprise in UK manufacturing and services PMI data is a welcome bellwether for the UK economy.
In sport, at 2-0 Liverpool leading, most people living in South Africa went to bed saying job done! You wonder what happened, when waking up and the final scoreline read 2-5 Real Madrid. Liverpool suffered an astonishing 5-2 defeat to Real Madrid at Anfield on Tuesday, as the world witnessed perhaps the beginning of the end of the Jurgen Klopp era as the Reds were all but officially eliminated in the Champions League round of 16. Liverpool will head to the Spanish capital for the second leg in three weeks’ time, on March 15, where they might try to overturn the three-goal deficit, or Klopp, assuming he is still in charge, could opt to field a weakened side as they chase a top-four finish in the Premier League.