Foreign Currency Market Update – GBP / ZAR Update
The Sterling South African Rand exchange rate spiked to its highest level for over five weeks early yesterday as investors shifted out of Rand-denominated assets.
The export-driven South African unit has been weighed down by soft data from the world’s two premier economies over recent days. The previous week’s trading had brought the release of official Chinese statistics which pointed to a year-on-year dip of over 12.0% in the level of shipments into China last month. Meanwhile, Chinese Gross Domestic Product data, published in the middle part of last week, pointed to a pronounced annualised drop in activity levels in the world’s second most significant economy from 7.3% during the final quarter of last year to 7.0% during the first three months of 2015.
Yesterday’s session brought another set of duff economic figures from the USA. The stand-out American release proved to be the March New Home Sales figure which showed a monthly drop of 11.4% compared to February’s counterpart result. Poor weekly US jobs numbers and a below-expectations survey of the vast US manufacturing sector added to the downside for commodity-fuelled currencies including the Rand. Meanwhile, on the domestic front, ugly scenes of xenophobic violence in South Africa added to the selling pressure on the Rand. The GBP ZAR exchange rate climbed as a result and the next stop for the pair, if its near-term forward momentum prevails, could be last month’s high of 18.6645.
Elsewhere, fears regarding the potential for a Greek eurozone exit further anchored the Rand this week. The eurogroup of Finance Ministers had previously set a deadline of today for the debt-addled Hellenic state to present a comprehensive list of economic reforms in order for it to qualify for further bail-out funding. However, a mid-week volte-face which saw the euroland policymakers downplay the significance of today’s meeting with the men from Athens, may allow the Rand to stage a mini-recovery against the Pound. GBP ZAR has come a long way in a short space of time – the pair was changing hands in the 17.50s as recently as 13th April. If the move which ensued has now run out of momentum, then GBP ZAR could rapidly trade back down to this level.
Heads Up
Summary of major upcoming data releases that we think may move the market.