Foreign Currency Market Update – GBP / ZAR Update
GBP ZAR has settled back above the 18.0000 threshold this afternoon following the confirmation from a Greek official that the debt-laden Hellenic state will formally request a 6-month extension to its current bailout loan. On the face of it, this appeared to be a positive move by the men from Athens, however Greece added a caveat to the request stipulating that the extension would have a newly negotiated set of austerity measures attached. Such a condition will not sit well with the EU / ECB / IMF ‘Troika’ which made its original €240bn loan available to Greece; Germany, in particular, is likely to object to any easing of the tight spending restrictions currently in place.
With analysts forecasting that without new funding Athens will run out of money within days, something’s got to give. The continued uncertainty threatens to sap the global market of appetite for risk – a development which will anchor the high-yielding South African Rand. A deterioration of the Greek crisis could therefore send GBP ZAR up towards its mid-December peak of 18.5660.
GBP ZAR was given an additional boost earlier today in the form of a highly positive set of UK labour market figures. The overall level of domestic joblessness dropped to a lower than anticipated 5.7%, while the level of people in work jumped to its joint highest level in record at 73.2%. Perhaps most importantly for the British economy, the Office of National Statistics data revealed a 2.4% increase during the final month of last year in comparison to December 2013’s counterpart number. With the latest UK inflation numbers showing that the pace of UK price rises has fallen to close to zero, today’s data points to a discernible rise in disposable incomes for British workers.
On the positive side for the Rand, market participants were unfazed by official data which showed that the pace of South African inflation slowed by a greater than expected amount during January. If Greece and the eurogroup are able to reach a near-term debt accord, then expect the Rand to build on this, sending GBP ZAR trending down towards last month’s low of 17.0356.
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Summary of major upcoming data releases that we think may move the market.