The Rand started the week in go-ahead mood.
Foreign Currency Market Update – GBP / ZAR Update
Sideways trading continued over the past week for GBP ZAR, as market participants struggled to assimilate several different ongoing risk events into their pricing on the pair. The Rand started the week in go-ahead mood following the pro-bailout result in Greece’s general election. This sent GBP ZAR to within one hundredth of a Rand of a new 6-week low at 12.8188. The move lower for the pair was further fuelled by Wednesday morning’s release of the latest Bank of England minutes, which revealed that four of the Bank’s nine-man monetary policy committee had voted in favour of more QE for the UK earlier this month. The news elicited renewed selling pressure on the Pound, as investors factored-in a high percentage chance that the MPC will vote for more QE next month.
However, the pair rapidly rejected its Wednesday low of 12.8188 to close the week at 13.0926, as appetite for riskier assets including the Rand ebbed following leading ratings agency Moody’s announcement that it was downgrading the credit ratings of fifteen global retail banks. Comments from new Greek Prime Minister Antonis Samaras suggesting that he would be seeking to renegotiate the terms of his country’s bailout took the gloss off the ostensibly pro-euro Greek election result, further diminishing investors’ appetite for risk.
This week’s session has begun with institutional investors still steering clear of riskier assets classes thanks to concerns that, following Samaras’ comments of last week, the eurozone debt summit scheduled for later this week, could descend into a stand-off between Greece and the richer Northern states, led by Germany, who remain fervently against easing the debt-laden Hellenic state’s bailout terms. The key UK data release this week comes on Thursday morning, with the publication of the finalised version of the government’s official GDP growth figures for the three months to the end of March. If this number shows at below the quarterly -0.3% which analysts are expecting, then there could be further downside for GBP ZAR. Conversely, bad news from Europe’s debt summit could send GBP ZAR back up towards last month’s near-term high of 13.3942.
Summary of major upcoming data releases that we think may move the market.
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