Foreign Currency Market Update – GBP / ZAR Update
The past week has seen the Pound Sterling to South African Rand (GBP/ZAR) exchange rate climb rapidly from a low of 20.8649 during Wednesday to a peak of 21.4308, the best exchange rate seen in the pairing in over 10 years. The Pound has remained close to the advantageous position of 20.9732 today and is expected to further its gains against the Rand during the week.
Last week, the Pound was moved mainly by UK data; the spate of negative results from the UK Trade Balance, Manufacturing and Industrial Production data caused Sterling to dive spectacularly from 21.4290 to 20.9672. The economic publications were decidedly unfavourable, seeing the annual Industrial Production change drop from 1.5% to 0.8%. The yearly manufacturing score was far worse – instead of increasing by the predicted 0.5%, the figure instead fell by -0.5%. For the Trade Balance figures for July, a disappointing expansion of the UK trade deficit was recorded.
In spite of this disheartening showing, Thursday brought great gains for the Pound with the release of the Bank of England (BoE) Monetary Policy Committee (MPC) minutes that accompanied the UK interest rate decision. As predicted, the rate didn’t change from 0.50% but the overall optimistic tone of the minutes, especially with regard to the recent meltdown in the Chinese stock markets, sent the Pound on a two-day rally into the close of the European trading session.
Today, the Pound has fared well against the Rand, most due to a continuing beneficial effect from last Thursday’s minutes and a crash in the price of platinum from over $980 on September 10th to just above $965 today.
This week, Pound Sterling/South African Rand exchange rate movement may occur as a result of the UK CPIs for August, the South African Q2 Current Account, the South African Retail Sales figures for July and the US Federal Open Market Committee (FOMC) Interest Rate Decision.
The UK inflation rate data out tomorrow is expected to be pessimistic for Sterling, with the base result dropping from 0.1% to 0% while the Core figure is expected to decrease from 1.2% to 1%. The South African Q2 Current Account figure, also out on Tuesday, is similarly expected to decline with a forecast for the trade deficit to widen from R-189bn to R-207.5bn. Unfortunately for Sterling, the South African Retail Sales results on Wednesday have a pair of increases on the cards, if predictions prove accurate. However, the last say may be had by the FOMC. In a major change from the past few months, forecasts are now for the FOMC to raise the US interest rate from 0.25% to 0.44% this Thursday, and if they do, the Rand is likely to crumble in value, allowing the Pound to seize the opportunity and take the lead.
Heads Up
Summary of major upcoming data releases that we think may move the market.