The Pound enjoyed seven consecutive sessions of gains against the beleaguered Rand.
Foreign Currency Market Update – GBP / ZAR Update
The Pound enjoyed seven consecutive sessions of gains against the beleaguered Rand leading up to last Wednesday’s session, as market participants grew increasingly fearful about the potential damage a ‘hard default’ by Greece would have on the global financial system.
Significantly, last Wednesday’s spike to 13.3942 eclipsed the previous near-term high of 13.3578, which GBP ZAR broke to on 21st November of last year. With consecutive highs getting higher and dips lower also getting higher, this confirms the major uptrend which GBP ZAR has been riding since the final week of 2010 when it was languishing as low as 10.1932.
The GBP ZAR exchange rate has eased back since last Wednesday’s break higher, partly due to a technical correction and partly due to comments from UK policy-makers during the latter half of last week, which saw UK Prime Minister David Cameron and Bank of England Governor Mervyn King both issue stark warnings about the negative effect an escalation of the eurozone’s debt crisis would have on the UK’s economy.
This week’s main event in South Africa sees the South African Reserve Bank monetary policy committee announce its interest rate decision on Thursday. The Bank’s repo rate stands at 5.5%, its lowest level for three decades, and any alteration to this would be a surprise, particularly given the fact that today’s domestic inflation figures are expected to register at well above the top end of the Bank’s target range. The sharp weakening of the Rand over the last ten weeks will have made imported goods more expensive, adding to internal price pressures in SA.
With appetite for risk returning to global markets at the start of this week’s session, benefitting both stock indices and the South African Rand, the GBP ZAR rate is firmly on the back foot once again. It now looks possible that the eurozone’s debt woes are now almost fully factored into the GBP ZAR rate, so this move lower for the pair may have legs. If this proves to be the case, then a return to the 12.50-12.70 level of interim support where the pair spent most of the month following the second week of April, looks possible.
Summary of major upcoming data releases that we think may move the market.
- Pound Sterling to South African Rand Foreign Currency Exchange Rate Forecast – Rand up on Record Gold Prices
- Pound Sterling to South African Rand Foreign Currency Exchange Rate Forecast
- Pound Sterling to South African Rand Foreign Currency Exchange Rate Forecast – Sterling slips below 11.00
- South African Rand Foreign Currency Exchange Rate Forecast – Sterling in freefall against strong Rand…
- Pound Sterling to South African Rand Foreign Currency Exchange Rate Forecast – Sterling bounces from 11.00