Foreign Currency Market Update – GBP / ZAR Update
Levels of support for the South African Rand have remained subdued during the past week. Yesterday’s comments from Deputy South African Reserve Bank Governor Francois Groepe suggesting that domestic economic growth levels continued to disappoint added to selling pressure on the Rand. However, Groepe’s words were not universally detrimental to the South African tender – he went on to state that another domestic interest rate cut was unlikely in the near-term due to ongoing inflationary pressures.
The Rand enjoyed a burst of support early last week when the eurogroup of Finance Ministers accepted Greece’s list of economic reforms which it had been requested to present in order to qualify for an extension of its bailout loan term. The men from Athens has been instructed to put forward their proposals by close of business Monday, but they missed this deadline and investors shifted out of risk-laden assets as a precautionary measure. When the list, which contained plans to force Greek citizens to pay their taxes and to chase down tobacco smugglers, materialized the next day, the euroland’s Finance Minister readily accepted it, adding to the impression that the European Union wants Greece to remain in the euroland, whatever it takes. The strengthening of the Rand which followed saw GBP ZAR drop to 17.6422 – its lowest level since the second week of last month.
However, the improvement in global risk sentiment proved relatively short-lived – Friday’s Q4 US Gross Domestic Product numbers, which brought a pronounced downward revision from earlier estimates – saw to that. The risk-driven South African unit remains susceptible to any fresh data which suggests that the global economic recovery is faltering; tomorrow’s US labour market data will therefore be closely-monitored by Rand-watchers. The key figure is expected to show that, for the twelfth month on the trot, over 200,000 new jobs were generated in the combined non-agricultural sectors of America’s vast economy last month. Such a result is likely to assuage investors’ fears regarding a renewed economic slowdown stateside, allowing the Rand to make a comeback. In such a circumstance, last week’s low of 17.6422 will become a target for the GBP ZAR exchange rate.
Heads Up
Summary of major upcoming data releases that we think may move the market.