Foreign Currency Market Update – GBP / ZAR Update
The South African Rand has encountered a sustained bout of selling pressure during this week’s session. The move against the Rand has seen the Pound Sterling Rand exchange rate spike from its Sunday night opening level of 17.5315 all the way up to 18.1326 a short time ago.
The move against the South African unit has been part of a generalised shift out of risk-laden assets by investors concerned that Greece may be about to be forced out of the eurozone by the region’s policymakers. The Hellenic state’s new hardline left-wing leadership will present their first concrete set of proposals for adjusting the terms of its bailout agreement to the eurogroup of Finance Ministers in Brussels later today and the signs are that they will not be well-received. Athens is seeking a large scale bridging loan to keep it solvent when its existing bailout funds run out on the final day of this month, however the EU’s policymakers have consistently advised Greece’s new government that it must stick to the terms of its existing agreement.
Something has to give sooner rather than later and many commentators feel that this may well result in a Greek exit from the eurozone. Such an outcome could potentially bring similar moves from other Southern European nations including Italy, Spain and Portugal. If evidence mounts that the eurozone is beginning to unravel, then it would appear likely that GBP ZAR will be heading higher still, with January 2014’s multi-decade high of 18.8211 providing an ultimate target. Domestic electricity shortages and declining levels of mining production are likely to heap further pressure on the South African unit moving forward.
On a brighter note for the Rand, last Friday’s US employment numbers revealed that over 200,000 new positions had been generated in the world’s premier economy for the eleventh month on the trot. With the overall US unemployment figure for January, published at the same time, revealing that joblessness in the States continues to remain under control, the signs are positive for a continuation of the US economic improvement. Investors holding the South African tender took heart from these numbers – if Greece manages to reach a swift accord with its creditors and market participants are able to re-focus on the improving American economic situation, then GBP ZAR may re-trace lower towards last month’s nadir of 17.0356.
Heads Up
Summary of major upcoming data releases that we think may move the market.