South African Rand (ZAR) on Bearish Trend in Anticipation of Current Account Report
Ahead of the South African Current Account the Rand (ZAR) has weakened across the board. Consequently the Pound Sterling to South African Rand (GBP/ZAR) exchange rate has been on a strong uptrend around 21.9680, despite disappointing UK data.
Earlier…
A stronger-than-expected South African Foreign Reserve figure has prompted the South African Rand (ZAR) to advance strongly today, while the Pound (GBP) weakens in the absence of domestic data.
South African Rand (ZAR) Climbed as Disappointing US Wage Growth Dented Odds of Fed Rate Hike
Although the Pound Sterling to South African Rand (GBP/ZAR) exchange rate recovered substantial ground ahead of the weekend much of this was wiped out as a result of the latest US Non-Farm Payrolls report. Despite a stronger jobs figure the lack of corresponding wage growth saw the US Dollar (USD) slump sharply, prompting a surge in demand for higher risk assets such as the Rand (ZAR). Pundits are increasingly assured that the Federal Open Market Committee (FOMC) will not move to raise interest rates in the near future, a prospect that shored up market risk appetite.
Improved South African Foreign Reserves Bolster South African Rand (ZAR) Today
The Rand has continued to advance this morning after South Africa’s Foreign Exchange Reserves were found to have expanded by more than expected in February, clocking in at 45.75 billion rather than 45.50 billion Dollars. This has offered some comfort to investors who have been increasingly concerned by the outlook of the domestic economy in recent months, as political turmoil and drought conditions have weighed heavily on sentiment. In large part this increase was due to the significant appreciation of gold prices since the start of the year, with a stronger US Dollar taking some of the shine off the figures.
Traders have generally moved away from the Pound today as a lack of fresh UK data offers little distraction from the persistent threat of a potential ‘Brexit’. Concerns over the growth prospects of the domestic economy ahead of the UK’s EU membership referendum are likely to remain a deterrent against Sterling strength for some months to come. After last week’s disappointing raft of UK PMIs there is no particular incentive for investors to buy back into the weakened currency at this juncture.
GBP/ZAR Exchange Rate Forecast: Weaker UK Retail Sales Predicted to Extend Pound Downturn
Should tomorrow’s South African Current Account fail to show an improvement in the fourth quarter, however, demand for the Rand is likely to be dented and the GBP/ZAR exchange rate may consequently return to an uptrend. Given some concerns that South Africa could be on the verge of a recession, any weaker data is expected to prompt renewed bearishness for the Rand.
Confidence in the Pound is unlikely to see a significant improvement on Tuesday as forecasts point towards a weaker BRC Like-for-Like Sales figure. If retail demand in February is confirmed to have slowed substantially on the year, then the GBP/ZAR pairing may struggle to capitalise on any Rand weakness, although a stronger showing could see a fresh boost in demand.
Current GBP, ZAR Exchange Rates
At the time of writing, the Pound Sterling to South African Rand (GBP/ZAR) exchange rate was slumped around 21.7060, while the South African Rand to Pound Sterling (ZAR/GBP) pairing was making gains in the region of 0.8157.
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