The GBP ZAR exchange rate has been on the slide since the near-term high of 13.3578, which it reached on 23rd November, 2011.
Foreign Currency Market Update – GBP / ZAR Update
Last week saw the GBP ZAR exchange rate stage a mini-recovery. The pair was languishing below the 12.0000 level last Monday – by Friday lunch time, it had recovered to trade as high as 12.2697. However, buying pressure built up for the Rand during the weekend close, seeing GBP ZAR open at a lower level than it had closed at on Friday, when the global currency markets re-opened on Sunday night. Such a ‘price gap’ in a downward move is generally considered by analysts to be a negative indicator. This does not bode well for Sterling’s chances against the Rand during this week’s session.
The Bank of England Monetary Policy Committee opted to extend its asset purchase target from its existing level of £275bn to £350bn on Thursday of last week. Previous extensions to the UK’s QE programme have caused selling pressure on the Pound, but the Bank’s action last week failed to unduly hamper Sterling, suggesting that market participants had largely factored-in the Bank’s move. Other UK data releases of note last week were generally Sterling-negative in tone; Thursday morning’s UK Industrial Production figure for December came out at -3.3% versus analysts’ expectations of a -3.1% print, while Thursday afternoon’s closely-watched NIESR GDP Estimate predicted that Britain’s economy is contracting at a quarterly rate of 0.2%. More positively, Friday morning’s UK Producer Price Index data showed that British factory gate prices rose at an annualised 7.0% last month, suggesting that inflationary pressures remain unresolved in the UK economy. Meanwhile, South African President Jacob Zuma announced last Thursday that his government is set to embark on ‘massive’ investment on the country’s ports and railways in an effort to boost South African exports.
*Denotes the importance of the data item *** being the highest level.
*** Tuesday’s UK CPI Inflation data for January is expected to show a marked drop from December’s 4.2%, to print at an annualised 3.6%.
*** Wednesday morning’s UK Unemployment figures for January will be closely-watched by analysts. An increase in British jobless claims of 3,000 is expected.
*** Wednesday afternoon sees the release of the latest Bank of England Inflation Report. Investors will be monitoring the report for clues on the future direction of British monetary policy.
** Friday morning’s UK Retail Sales numbers for January are expected to show a monthly contraction of 0.3%, following December’s positive 0.6% showing, providing the potential for selling pressure on the Pound.
The GBP ZAR exchange rate has been on the slide since the near-term high of 13.3578, which it reached on 23rd November, 2011. Every downtrend will have minor corrections along the way and the slight upward move for the pair over the past week would appear to be just that – a minor correction. This week’s session has begun with an increase in global investors’ appetite for risk, following the positive austerity vote in Greece’s parliament last night. Analysts would expect to see the Rand supported following the news, as market participants seek out investments which are perceived to carry a higher risk tariff. A continuation of the existing downward move for GBP ZAR would see last September’s significant low of 11.2890 emerge as the next interim downside target.
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