Foreign Currency Market Update – GBP / ZAR Update
Over the past week, the Pound Sterling to South African Rand (GBP/ZAR) exchange rate trended within the range of 19.4968 to 20.0406.
Although the GBP/ZAR pairing declined as Sterling broadly softened following ‘Not-so-Super’ Thursday, Rand weakness has since seen the Pound recover much of its losses.
After the People’s Bank of China (PBOC) opted to intervene in the currency market in order to devalue the Chinese Yuan, market sentiment dampened considerably. The relatively strong position of the US Dollar also weighed on demand for emerging-market assets. As a result of this, the Rand has performed poorly over the past week versus many of its major peers. Although China’s central bank officials pledged to make every effort to avoid a long rout of devaluation, many traders feel that it will take very heavy intervention to prevent sustained depreciation.
After last week’s Super Thursday, the Pound fluctuated versus its currency rivals due to reduced Bank of England (BoE) interest rate hike expectations. Sentiment towards the British asset improved slightly before the weekend, however, after Friday’s trade balance data showed the UK’s deficit widened less-than-expected. Traders will be looking at domestic data closely in the months ahead in order to determine bets as to the timing of a BoE benchmark rate hike.
The Pound Sterling to South African Rand (GBP/ZAR) exchange rate edged higher by around 0.2% during the early stages of Wednesday’s European session.
Although the Rand has softened in response to the sell-off in emerging-market assets and persistent US Dollar strength, the downtrend has been a little limited due to the Rand tracking Euro gains after and Eurozone officials finally agreed to the terms of Greece’s third bailout package. However, the South African asset continues to struggle against the backdrop of serious issues with the nation’s leading energy provider, Eskom. It has been reported that Eskom’s profits have halved since struggling to cope with demand as a result of tired and failing equipment. However, the cost of rolling blackouts to the energy company pales in comparison when looking at the damage caused to South Africa’s economic growth.
On Wednesday the Pound fell versus many of its currency rivals thanks to unimpressive UK employment figures. Of particular disappointment was Average Weekly Earnings in the three months through June, which came in at 2.4% on the year; significantly lower than the 2.8% forecast.
The Pound Sterling to South African Rand (GBP/ZAR) exchange rate dropped to a low of 19.8760 during Wednesday’s European session.
Looking ahead, there will be several data publications over the next few days with the potential to provoke volatility for the GBP/ZAR exchange rate. For those invested in the Rand, Thursday’s Mining Production is likely to be impactful. However, market sentiment and the position of the US Dollar is more likely to provoke changes for the South African asset. In terms of British data; RICS House Price Balance and Construction Output numbers will be of interest.
The Pound Sterling to South African Rand (GBP/ZAR) exchange rate advanced to a high of 20.0360 during Wednesday’s European session.
Heads Up
Summary of major upcoming data releases that we think may move the market.