Pound to South African Rand Forecast – The Pound made two separate incursions above the significant 13.0000 level against the Rand

Pound Sterling to Australian Dollar Foreign Currency Exchange Rate Forecast - The Pound has started 2012 firmly on the back foot against the Australian DollarToday has seen the Rand give up a large portion of the gains it made against the Pound during last week’s session.

Foreign Currency Market Update – GBP / ZAR Update

The Pound made two separate incursions above the significant 13.0000 level against the Rand in the last two months of 2011. On both occasions, the visit lasted a few brief days and on both occasions the level was strongly rejected in the weeks which followed. The GBP ZAR rate last traded above 13.0000 in the immediate lead-up to Christmas and the hangover which has ensued has been painful for investors needing to purchase Rand-denominated assets, taking the GBP ZAR rate all the way down to a four month low of 12.1610 last Friday.

Last Week

The South African currency remains strongly tethered to global risk appetite – when stock markets trade into positive territory, the Rand will invariably be on the front foot. Last week saw global stock indices register healthy gains, providing a fair wind for the Rand. Meanwhile, things were going a lot less swimmingly for the Pound, as UK data releases provided cause for concern for investors holding Sterling. Wednesday was a key day for the Pound – the release of the minutes of the Bank of England Monetary Policy Committee meeting from earlier this month suggested that policy members seeking a further loosening of policy, in the form of an increase in the Bank’s QE programme, may be close to winning the argument. UK GDP growth figures, released at the same time, showed that the British economy shrank by 0.2% in the last quarter of 2011. A repeat performance for Q1 2012’s counterpart figure, later this year, would mean that Britain had double-dipped its way into a new recession.

Heads Up

*Denotes the importance of the data item *** being the highest level.
** The latest GfK Consumer Confidence survey is released in the early hours of Tuesday morning. An improvement from December’s figure of -33 is expected.

** Tuesday morning sees the release of UK Mortgage Approval data for December.

** Wednesday, Thursday and Friday bring the release of the latest Purchasing Managers’ Index surveys for the UK’s Manufacturing, Construction and Services sectors respectively. The Services edition will be the most closely-watched.

Outlook

Today has seen the Rand give up a large portion of the gains it made against the Pound during last week’s session, pushing the GBP ZAR rate back towards 12.3500. The move against the Rand has come as institutional investors shift their funds out of assets which are perceived to carry a higher risk tariff. This flight to safety has been caused by the ongoing failure of Greece’s government to reach an accord with the Institute of International Finance – the body appointed to represent the debt-addled Hellenic state’s creditors. Last Friday’s weaker than anticipated US growth figures also dampened the mood of market participants, proving that bad news for the world’s leading economy also spells bad news for the world economy. There has been very little trading between last Friday’s 4-month low of 12.1610 and the key interim floor of 12.0000 in the last few years, suggesting that if the GBP ZAR rate breaks down through 12.1610, a break down through 12.0000 could follow in short order. Caution is advisable for clients needing to purchase ZAR in the short-to-medium term.

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