Foreign Currency Market Update – GBP / ZAR Update
The first two sessions of this week have brought the release of distinctly below-par PMI surveys of two key areas of the British economy. Monday’s gauge of activity in the domestic construction sector pointed to the weakest level of growth since the middle part of 2013, while Tuesday’s PMI survey of the UK services sector showed at its lowest level for some nineteen months. If Friday’s closely-monitored NIESR GDP estimate of growth levels in the UK economy disappoints, then there could be further downside in store for GBP ZAR in the short-term.
The febrile situation in the eurozone could add further fuel to any downward move for the Pound Rand exchange rate. If this morning’s inflation numbers suggest that the euroland economy experienced deflation last month, then expect market whispers that the European Central Bank (ECB) will embark on an all-out Quantitative Easing programme later this month to escalate. If the ECB does confirm that it will be bulk-purchasing regional sovereign debt in an effort to boost mainland Europe’s economic performance, then look for the export-led South African Rand to improve across the board. Such an outcome could see the GBP ZAR exchange rate tumble towards its mid-November low of 17.0828.
However, current opinion polls suggest that the left wing and anti-bailout Syriza bloc may be set to win the day when Greek voters go to the polls on 25th January for the nation’s General Election. Such an outcome would stoke market rumours regarding a Greek exit from the European Union, which would in turn increase investor focus on the fragile state of Italy’s finances. If the final week of this month does trigger panic in the global markets regarding a break-up of the EU, then the Rand will ship support. A realistic target for GBP ZAR in such a situation would be last month’s 6-month high of 18.5660.
Heads Up
Summary of major upcoming data releases that we think may move the market.