Foreign Currency Market Update – GBP / ZAR Update
Over the past week, the Pound Sterling to South African Rand (GBP/ZAR) exchange rate was trending within the range of 20.3216 to 21.2091.
Last week the South African Rand was trending in a comparatively weak position versus its peers amid damp market sentiment. The uncertainties regarding China’s economic slowdown and the fallout from the Asian nation’s equity market issues have seen emerging-market assets decline significantly. Although the Euro’s strong performance last week prevented a larger Rand depreciation, traders are showing increased reluctance to invest in high-risk assets with a lack of global inflationary pressures and bearish commodity prices to contend with.
South African economic data produced disappointing results last week which added to the currency’s downtrend. August’s Barclay’s Manufacturing PMI was predicted to drop from 51.4 to 49.57, but the actual result fell to 48.9; below the 50 mark which separates growth from contraction. August’s New Vehicle Sales also failed to meet with expectations of a slight drop from 53810 to 53406, with the actual result hitting 51055. Additionally, August’s Standard Bank PMI remained in contraction territory having only risen from 48.9 to 49.3.
The Pound Sterling to South African Rand (GBP/ZAR) exchange rate was trending in the region of 21.2300 during Monday’s European session.
On Monday morning the South African Rand dived against the Pound Sterling by around -1.0%. The Rand fell versus most of its major peers despite the fact that Foreign Exchange Reserves improved from $45.82 billion to $46.08 billion in August. The Rand depreciation can be linked to ongoing concerns regarding China’s equity market after the Shanghai Composite Index fell 2.5%. This suggests that Beijing’s extensive intervention hasn’t had the desired impact thus far. Also weighing on demand for the South African Rand is speculation that the Federal Reserve will hike the cash rate in 2015 following impressive labour market data.
Despite a complete absence of domestic data, the Pound advanced versus its major peers on Monday. The appreciation can be attributed to Glencore aiding a rise in the FTSE after the firm announced plans to cut billions of Dollars in debt in the face of weakening metals prices.
Looking ahead, there will be several influential data publications with the potential to provoke changes for the GBP/ZAR exchange rate over the coming week. In terms of South African data, however, the economic docket is comparatively sparse with only Tuesday’s third-quarter Business Confidence due for publication. In terms of British data, however, Friday’s Bank of England (BoE) Inflation Target will be of significance given the lack of domestic inflationary pressure. The BoE interest rate decision will be released on Thursday, but most economists don’t expect the result to be particularly impactful given the high likelihood that policymakers will opt to hold the cash rate at this juncture.
The Pound Sterling to South African Rand (GBP/ZAR) exchange rate was trending within the range of 21.0387 to 21.2091 during Monday’s European session.
Heads Up
Summary of major upcoming data releases that we think may move the market.