The last trading week saw the Pound Sterling to South African Rand (GBP/ZAR) exchange rate gradually ease from a high of 24.0944 to a low of 23.4654.
GBP Softened by BoE’s Carney’s Dovish Display
The greatest cause of the Pound’s (GBP) downfall last week came from the highest level, in the form of Bank of England (BoE) Governor Mark Carney. Speaking on Tuesday, the policymaker declared that no UK interest rate hike would be taking place in the immediate future. The frankness of Carney’s comment stunned investors and sent the Pound crashing against most of its economic rivals.
The Pound gradually recovered from this point of defeat over the course of the week, although even Friday’s better-than-expected borrowing figures for December failed to generate an uptrend against the Rand.
Pound Sterling Soft Today as Tax Embarrassment Comes to Light
The UK currency has been trending narrowly against many of the usual rivals today, with these losses being brought about by news concerning corporation tax in the UK. Although Google ostensibly owes around £200m in tax to the UK government every year, HMRC has only managed to wring £130m out of the global tech giant.
The future does not look particularly bright with this news in mind, given that HMRC still has to extract sizable back-taxes from similarly large companies, Facebook and Amazon.
In other developments today, the Confederation of British Industry (CBI) Business Optimism Index for the first quarter has merely dropped from -12 points to -4, while still remaining in a lacklustre negative range. The January Industrial Trends Orders have been similarly disappointing, having fallen from -7 to -15.
Scant Data Releases Failed to Limit ZAR Uptrend Last Week
The past week’s Rand movement was mainly dictated by the fluctuating price of precious metals; on the whole, the cost of gold, platinum and copper rose to support the Rand.
Wednesday brought the only South African domestic data to speak of, which covered the nation’s December Inflation Rate figures as well as the November Retail Sales results. Consumer price pressures increased while Retail Sales also posted healthy gains.
No South African data has come out today, so investors have instead had to rely on the statement from President Jacob Zuma’s office that ‘the overwhelming sentiment emanating from Davos was that investors continue to see South African as a preferred investment destination’.
This Week’s GBP/ZAR Exchange Rate Forecast
Over the course of this week Pound Sterling/South African Rand exchange rate movement may occur as a result of Thursday’s UK Q4 GDP result and Friday’s Gfk Consumer Confidence Survey. GDP is expected to shift from 2.1% to 1.9% while a decline is forecast for Consumer Confidence from 2 points to 1.
On South Africa’s side, Thursday will bring the South African Reserve Bank’s Interest Rate Decision and Friday will see the Balance of Trade Announcement.
No change is expected for the current rate of 6.25% while the nation’s Trade Balance is forecast to fall from a surplus 1.77bn into a deficit of -2.7bn.
Heads Up
Summary of major upcoming data releases that we think may move the market.