The Pound Sterling to South African Rand (GBP/ZAR) exchange rate advanced by around 1.00% whilst the Pound Sterling to US Dollar (GBP/USD) exchange rate edged higher by around 0.15%.
After the Pound enjoyed a healthy surge in response to positive ecostats and speculation of a sooner-than-anticipated Bank of England (BoE) interest rate increase, profit-taking traders caused the Pound to soften versus many of its peers. The depreciation was extended on Monday after mixed domestic data erred towards negativity.
The South African Rand, meanwhile, declined versus most of its rivals in response to damp market sentiment seeing cooling demand for emerging-market assets. In addition, traders are showing reluctance to invest ahead of the decision by the National Energy Regulator of South Africa (NERSA) as to whether Eskom can hike the price of energy.
The US Dollar advanced versus its competitors after the crisis in Greece saw heightened demand for safe-haven assets. However, Pending Home Sales data printed poorly which caused the US asset to resume declination.
The Pound Sterling to South African Rand (GBP/ZAR) exchange rate is currently trending in the region of 19.3440.
The Pound Sterling to US Dollar (GBP/USD) exchange rate is currently trending in the region of 1.5765.
Pound Sterling (GBP) Exchange Rate Forecast to Advance against the South African Rand ahead of NERSA Decision on Eskom Tariff
After British economic data produced less-than-ideal results, the Pound slumped versus many of its competitors. Of particular disappointment was May’s Mortgage Approvals which came in at 64,400; missing the median market forecast 68, 800. Samuel Tombs, senior UK economist at Capital Economics, said: ‘The weakening of UK bank lending growth in May is likely to be just a blip in an improving trend, now that the banking sector has a better bill of health and consumers are feeling more confident. The lull in mortgage approvals in May might have partly reflected concerns about the potential outcome of the general election.’
The situation in Greece has reached crisis point as banks close, capital controls are imposed and uncertainty mounts with regards to Greece’s future in the Eurozone. With a referendum on austerity measures scheduled for after a large International Monetary Fund (IMF) repayment is due, Greece will almost certainly default on the consolidated payment. The crisis has caused trader risk-appetite to dampen considerably which has seen diminished demand for emerging-market currencies.
In addition to market sentiment weighing on demand for the Rand, a NERSA decision on Eskom’s energy prices is also causing headwinds. With uncertainty as to whether hiking rates will be accepted by South African’s who have lived through months of blackouts due to tired machinery, the potential for massive strikes and political upheaval is weighing on investor confidence. What is more, if Eskom fail to get the price hike accepted they may not be able to prepare the grid for future demand and could see an indefinite extension to load-shedding.
The Pound Sterling to South African Rand (GBP/ZAR) exchange rate was trending within the range of 19.1850 to 19.4080 today.
Pound Sterling to US Dollar (GBP/USD) Exchange Rate Forecast to Trend Higher despite Safe-Haven Demand
As explained above, the worsening situation in Greece is having a marked affect on trader risk-appetite. The US Dollar advanced versus the majority of its peers thanks to heightened demand for safe-haven assets during a time of such uncertainty in Europe. This is having a detrimental effect on rate hike prospects however, as the Federal Reserve have openly complained about overvaluation hindering policy decisions.
Although the US Dollar appreciated on Monday there is still concern regarding recent weak ecostats and pared bets as to the timing of a Federal Reserve interest rate hike. Pending Home Sales missed estimates in May which has added to fears that the US economy is in a state of slowdown.
The Pound Sterling to US Dollar (GBP/USD) exchange rate was trending within the region of 1.5681 – 1.5744.
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