Foreign Currency Market Update – GBP / ZAR Update
The GBP/ZAR exchange rate has fluctuated between lows of 22.6702 and highs of 23.2199 over the past seven days of trading.
The GBP/ZAR exchange rate made significant gains on the 30th despite news of a 4.5% rise in house prices, which adds to fears that the UK is currently in a housing bubble. Data showed that South African trade had been particularly successful in November, with the balance of trade leaping from a deficit of ZAR-21.6 billion to a surplus ZAR1.77 billion. Regardless, Pound Sterling was able to advance throughout the day and night, peaking during New Year’s Eve.
With no data available for the UK on the 31st, South Africa’s positive Private Sector Credit and M3 Money Supply figures were able to give the Rand significant traction. As a result, GBP/ZAR fell from a two-and-a-half-week high of 23.2199 to 22.7741 by the close of the London session. Pound losses were exacerbated by flooding in several parts of the north of England, which analysts predict has already cost the UK economy billions of Pounds, with more bad weather on the way.
After flat trading over the New Year period, GBP recovered from a slump to open on Tuesday trading at 23.0797. A surprise drop in UK Manufacturing PMI saw the South African Rand advance on Monday, with survey compiler Markit revealing that performance in the sector was worse in 2015 than the previous year. Printing at 51.9, the PMI barely registered any growth, which suggests that other sectors of the UK economy will have to outperform expectations in order to balance final quarter GDP. The South African Rand rose steadily throughout the day, erasing the previous day’s losses by the close of the session.
Pound Sterling has been buoyed today by the UK construction sector PMI, which shows better-than-expected growth in the industry. Both residential and commercial construction activity saw a significant increase, although civil engineering did post a marginal decline after seven months of growth.
The Standard Bank PMI is due out tomorrow, which will give an indication of business conditions in South Africa, taking into account new orders, output, employment, supplier’s delivery times and stocks of purchases. The previous PMI showed that conditions were deteriorating marginally and tomorrow’s index is expected to show that the deterioration has accelerated. Manufacturing Production figures are due out on Monday and are expected to show an increase in production after the previous decline. The UK has composite and services PMIs due out on the 6th and trade balance figures on the 8th.
The GBP/ZAR exchange rate is currently trending between 22.7800 and 22.9930.
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