Pound to South African Rand Exchange Rate Forecast – The Pound continued to trend weaker against the South African Rand

Pound to South African Rand Exchange Rate Forecast - The Pound continued to trend weaker against the South African RandCaution is advisable for clients needing to buy Rand, as there is an outside chance that the Bank of England will reveal a further increase to its £325bn Quantitative Easing programme.

Foreign Currency Market Update – GBP / ZAR Update

The Pound continued to trend weaker against the South African Rand during the first half of last week’s session in the currency markets, taking GBP ZAR all the way down to a new 5-month low of 11.8209 on Wednesday. The downward shift was partly technical in nature – the pair started out on a near-term downtrend on 16th February and last week’s low could be viewed as the culmination of that move. However, the spike downwards was also driven by market fundamentals; investors were buoyed by the European Central Bank’s mid-week announcement that it was set to make €530bn available to European retail banks in the form of low-cost 3-year bonds, in order to help them to shore-up their ailing balance sheets. The news triggered a scramble for high-yielding assets from institutional investors, which saw the Rand well-supported.

However, the break lower for GBP ZAR did not hold for long, as risk aversion rapidly seeped back into investors’ thoughts, causing a shift out of Rand-denominated assets. The flight to safety over the past three sessions has been caused by several developments – Friday’s announcement by the new Spanish Prime Minister, Mariano Rajoy, that his country would fail to keep to its budget target for 2012, gave market participants the jitters. Fear levels increased markedly over the weekend, when US President Barack Obama stated that America ‘would not hesitate’ to use force against Iran. The negative mood was added to when Chinese Premier Wen Jiabao announced during Monday’s Asian session, that China was cutting its GDP growth target for the first time in eight years, from 8.0% to 7.5%. These developments have combined to elicit a move out of the Rand this week, which has seen the GBP ZAR rate re-establish itself above the 12.0000 level. The mid-February high of 12.3676 remains the near-term target if this break higher persists. However, caution is advisable for clients needing to buy Rand, as there is an outside chance that the Bank of England will reveal a further increase to its £325bn Quantitative Easing programme at Thursday’s MPC policy announcement – an action which would be likely to hurt the Pound.

Heads Up

Summary of major upcoming data releases that we think may move the market.

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