Foreign Currency Market Update – GBP / ZAR Update
Over the past seven days the Pound Sterling to South African Rand (GBP/ZAR) exchange rate has been trending within the range of 21.4392 to 21.9463.
Amid increased confidence regarding a December Federal Reserve benchmark rate increase, the South African Rand weakened versus its currency rivals. Last Friday saw the Rand dive further during subdued market trade after US Consumer Sentiment improved and commodity prices remained under pressure. A Fed rate hike will dampen demand for the South African Rand for two main reasons: as an emerging-market asset the Rand will suffer from increased demand for the safe-haven Dollar, and gold prices will likely weaken in the immediate aftermath of an adjustment.
With a comparatively sparse British data docket last week, the Pound spent the first few days softening versus many of its rivals. However, Wednesday saw the Pound recover earlier losses as UK Unemployment unexpectedly dropped to the lowest level since 2008. Euro weakness also pushed Sterling higher as the week progressed, with the GBP/ZAR exchange rate improving as the Rand tracked Euro losses. Increased speculation regarding a December Federal Reserve rate hike lent the Pound additional support given that most economists don’t expect the Bank of England (BoE) to raise rates ahead of the Fed.
The Pound Sterling to South African Rand (GBP/ZAR) exchange rate softened by around -0.2% on Monday morning.
In the early stages of this week’s trade the South African Rand edged higher versus its currency rivals despite ongoing Euro weakness. This fractional appreciation can be attributed to gold prices which are rising in response to safe-haven demand following the tragic attacks in France late on Friday evening. Also supporting demand for the Rand on Monday is the prospect of a great deal of money being recovered by Eskom, South Africa’s foremost energy provider. Some 27 municipalities owe the embattled energy company billions of Rand and face a black Christmas should they continue to refuse payment.
On Monday morning the Pound declined versus the majority of its peers as relatively positive UK housing data fuelled property bubble concerns. The depreciation can also be linked to mounting fears that the UK could be the next target for ISIS. Prime Minister David Cameron is considering adopting new security measures, but uncertainty about the extent of these measures has also hindered Sterling investment on Monday morning. Despite the Rand making marginal gains, the GBP/ZAR exchange rate is still holding a comparatively strong position as the prospect of a Fed rate hike continues to weigh on the Rand.
The Pound Sterling to South African Rand (GBP/ZAR) exchange rate was trending in the region of 21.8980 during the early stages of Monday’s European session.
Looking ahead, there will be a number of important ecostats for South Africa this week. On Thursday the South African Reserve Bank (SARB) interest rate decision will be hugely influential. Whilst most economists believe the SARB will hold rates at this time, there are a few who expect the central bank to cut by 25 basis points to cushion the blow from a higher Fed overnight cash rate. Wednesday’s Retail Sales data is also likely to provoke Rand volatility.
In terms of British data this week, Tuesday’s Consumer Price Index will be the most significant domestic publication. This is because the absence of price pressures is having a detrimental impact on policymaker confidence, especially after the BoE’s quarterly inflation report predicted that inflation would remain below target throughout 2016. Thursday’s Retail Sales data and Friday’s Government Spending data will also be likely to provoke Sterling movement this week.
The Pound Sterling to South African Rand (GBP/ZAR) exchange rate was trending within the range of 21.7540 to 21.9120 during Monday’s European session.
Heads Up
Summary of major upcoming data releases that we think may move the market.