SOUTH AFRICA: DA Said To Be Readying For GNU Exit After Budget Stand-Off
Apr-03 06:34
- The National Assembly passed the fiscal framework underpinning the 2025 National Budget, as the African National Congress's (ANC's) deal with ActionSA allowed them to overpower resistance from the Democratic Alliance (DA), the second-largest party in the coalition government. Earlier press reports noted that President Cyril Ramaphosa told the ANC's caucus that it the DA vote against the fiscal framework, they would define themselves outside of the Government of National Unity (GNU). The fiscal framework was adopted with 194 votes in favour, 182 against, and no abstentions.
- A piece circulated by TimesLIVE this morning suggested that although DA leader John Steenhuisen said that the party would not be making any rushed announcements, it is believed that its ministers and deputy ministers have started preparing to leave their offices, with the party finalising plans to exit the ruling coalition in the coming days. Steenhuisen said that the decision whether to leave the GNU will be made by the DA's Federal Executive within the next 48 hours.
- The Presidency expressed similar sentiment, noting that Cyril Ramaphosa will "take his time" to make the decision on the steps forward, while Finance Minister Enoch Godongwana accused the DA of negotiating in bad faith and said that the ANC should not allow officials opposing the budget to serve in the government.
- Bloomberg reported that US officials told visiting South African business and labour leaders that mending bilateral ties depends on balancing trade, otherwise Pretoria's benefits from the African Growth and Opportunity Act (AGOA) may end. AgriSA head Johann Kotze said that "there was a sense [in the US] that it's freebie and there's not something back for America."
- South Africa's S&P Global PMI will hit the wires at 08:15BST/09:15SAST. Later in the day, electricity production/consumption data will be published at 12:00BST/13:00SAST.
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ECB: VIEW CHANGE: MS adds April cut but maintains 1.00% terminal rate
Mar-04 06:33
- Following a 25bp cut this week, Morgan Stanley no longer looks for a pause in April and instead looks for a 25bp cut. It then looks for a final sequential cut to 2.00% in June 2025. Thereafter it looks for a slower pace of cuts (at projection meetings only) to reach a terminal 1.00% rate in June 2026.
- Previously MS had seen an April pause before sequential cuts through to the same 1.00% but reached in Q1-26.
- MS notes that "The incoming data has been weaker than expected, both on the inflation and growth front... we revised last week our forecast for EA GDP growth... We expect the ECB to do the same and mark down its growth forecasts on Thursday as well. All these data are likely to support a view within the Council that rates can be brought fast to a level most Council members think is neutral. And we believe this level is 2.0%."
- Thereafter expect the ECB to "only deliver rate cuts at projection meetings, reacting to subdued growth and weak inflation momentum. In our view, it will take the Council until the December meeting to cut rates with an explicit view that a move below neutral is warranted."
UK DATA: BRC-NielsenIQ Shop Prices: Deflation Stable; Elevated Food Prices in H2
Mar-04 06:27
Repeats the bullet from 00:01GMT.
BRC-NielsenIQ Shop Prices fell by 0.7% Y/Y for the second consecutive month, remaining in the range of -0.8% to -0.6% since September 2024 (excluding December which was distorted by Black Friday). The Shop Price Index remains in deflation for the seventh consecutive month.
- On a sequential basis, Shop Prices rose 0.4% M/M (vs a fall of 0.4% in January), marginally below their February average (2010-2019 average of 0.52% M/M - note none of these data are seasonally adjusted).
- Food price inflation accelerated to 2.1% Y/Y, after softening two-tenths to 1.6% in January. This is the highest Y/Y print since September 2024, after recording the lowest print since November 2021 in January. On a monthly basis, food prices rose 0.4% M/M - this is significantly above the February norm (2010-2019 February average of 0.18% M/M) but followed a 0.5% print in January - which was the weakest January print since 2015.
- The Chief Executive of the BRC highlights "prices on the month saw the biggest increase in the last year...butter, cheese, eggs, bread and cereals all saw price hikes" and expects "food prices to be over 4% up by the second half of the year."
- We estimate food inflation contributed 0.11ppt to the change in January headline CPI, and despite recent divergence between the official ONS series and the BRC-NielsenIQ Shop Price series particularly in December when data was distorted by Black Friday, the current data highlights the potential risk of elevated food prices in the months ahead.
- Non-Food Prices remained in negative territory for the eleventh consecutive month, falling 2.1% Y/Y from -1.8% in January. This marks the lowest reading since October 2024 (excluding December distorted data).
- On a monthly basis, non-food prices rose 0.5% M/M (after -0.9% in January), this is below the February norm (2010-2019 February price growth average of 0.72%). However, bear in mind that this data is showing very little correlation with the ONS non-energy industrial goods reading in recent months, which has moved comfortably into positive territory in Y/Y terms.
- The press release states the rise is driven by January promotions ending.
- Survey Period: 1 to 7 February 2025.
GBPUSD TECHS: Trend Needle Points North
Mar-04 06:26
- RES 4: 1.2887 2.0% 10-dma envelope
- RES 3: 1.2811 High Dec 6 ‘24
- RES 2: 1.2767 50.0% retracement of the Sep 26 ‘24 - Jan 13 bear leg
- RES 1: 1.2723 High Feb 26
- PRICE: 1.2699 @ 06:24 GMT Mar 4
- SUP 1: 1.2545 50-day EMA
- SUP 2: 1.2440 Low Feb 13
- SUP 3: 1.2333 Low Feb 11 and a key support
- SUP 4: 1.2249 Low Feb 3
The trend outlook in GBPUSD remains bullish - for now - and Monday’s strong gains reinforce this theme. Note that moving average studies have recently crossed into a bull-mode position, highlighting a potentially stronger bull cycle. Initial firm support to watch is 1.2545, the 50-day EMA. A continuation higher would open 1.2767, the 50.0% retracement of the Sep 26 ‘24 - Jan 13 bear leg.
