Foreign Currency Market Update – GBP / ZAR Update
The Rand had been faring relatively well until the World Bank’s report and had steadily improved against the Pound over the previous seven days, sending GBP ZAR down to its lowest level for over a month during trading yesterday. An improvement in the price of gold and platinum had helped the Rand since the markets re-opened on Sunday night, while continued talk of all-out Quantitative Easing from the European Central Bank for next Thursday added to the positive mood enveloping the South African unit.
Today’s opinion from leading European Union lawyer Cruz Villalon that the ECB’s Outright Monetary Transactions (OMT) programme is permissible under EU law makes an announcement of full-tilt QE more likely. If market participants set the World Bank’s worrisome report to one side and instead focus on the high potential for QE for the euroland economy next week, then expect GBP ZAR to peel back to its key interim floor of 17.0828, which it looked to be heading towards until today.
However, this afternoon’s grim Advance Retail Sales data from the US, which showed that shop sales during the key month of December had fallen by almost 1.0% in comparison with the previous year’s counterpart figure, could trigger renewed selling pressure on the Rand. If GBP ZAR does track higher once again, then the next key band of technical resistance it will encounter comes at the psychologically significant 18.000 level.
Heads Up
Summary of major upcoming data releases that we think may move the market.