Foreign Currency Market Update – GBP / ZAR Update
Over the past week, the Pound Sterling to South African Rand exchange rate was trending within the range of 20.5657 to 20.9387. Despite the fact that trade has been comparatively subdued of late amid uncertainties regarding Federal Reserve opacity, the GBP/ZAR exchange rate fluctuated considerably. The Rand saw initial losses after the price of platinum dived in response to the Volkswagen scandal. However, as it became more apparent that China’s equity markets were stabilising, the Rand saw heightened demand. The British Pound generally softened versus its peers last week after domestic data produced mostly disappointing results.
Towards the close of last week, the Pound Sterling to South African Rand exchange rate dived following a particularly unimpressive US Change in Non-Farm Payrolls report. The data caused traders to delay bets regarding the timing of a Federal Reserve benchmark rate hike. This weighed on demand for the British asset as most analysts agree that the Bank of England (BoE) will not hike the cash rate before the Fed. The poor NFP report also supported demand for the emerging-market South African Rand as a Fed rate delay improved trader risk-appetite. Gold prices also advanced in response to the negative US data which fuelled demand for the South African asset.
The Pound Sterling to South African Rand (GBP/ZAR) exchange rate is currently trending in the region of 20.6960.
On Monday the Pound Sterling to South African Rand exchange rate dived by around -0.7%. British Services output saw the slowest growth in over two years amid signs that consumers are trimming back leisure time in the face of economic uncertainty. This had a particularly detrimental impact on demand for the Pound given that the services sector accounts for the largest portion of British Gross Domestic Product. Conversely for the Rand, disappointing data wasn’t enough to offset the currency’s gains. The Standard Bank PMI declined from 49.3 to 47.9 in September. However, the prospect of Federal Reserve rate hike delays (as traders continue to struggle to digest the shocking US NFP report) has allowed the South African Rand to strengthen versus many of its peers.
Looking ahead, South African economic data is somewhat thin on the ground for the remainder of this week’s trade with the exception of Thursday when Gold Production, Mining Production and Manufacturing Production data have the potential to provoke Rand volatility. However, for the most part the South African asset will be subject to US Dollar movement, precious metal prices and market sentiment. For those trading with the Pound, there will be several influential ecostats over the remainder of the week. Perhaps the most significant will be Thursday’s Bank of England (BoE) interest rate decision. Although the Monetary Policy Committee (MPC) are not expected to alter policy at this juncture, the minutes will be published simultaneously and they will have much greater impact on Sterling movement; especially if it transpires that one or more policymakers voted for an immediate lending rate increase. UK Trade Balance, RICS House Price Balance, NIESR Gross Domestic Product Estimate, Manufacturing Production and Industrial Production will all be of interest to those trading the Pound.
The Pound Sterling to South African Rand (GBP/ZAR) exchange rate was trending within the range of 20.5290 to 20.9370 during Monday’s European session.
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Summary of major upcoming data releases that we think may move the market.