Pound to South African Rand (GBP/ZAR) Exchange Rate Dips as Investors Consider Inflation Reports

Overnight data showed that foreign direct investment in China surged by 16.1 per cent, year-on-year, rather than gaining by the 2.5 per cent forecast. However, the world’s second largest economy also sold repurchase contracts for the first time since mid-2013.

Emerging market assets consequently lost some of their appeal, and even as the price of crude oil rose the Rand slipped against its currency rivals.

The Rand was also adversely affected by anticipation surrounding tomorrow’s South African inflation report.

The data is expected to show that consumer prices climbed at a pace of 5.7 per cent in January, up from an acceleration of 5.4 per cent in December.

As the data could be responsible for the next interest-rate action taken by the Reserve Bank of South Africa, the result will be of particular interest.

In the opinion of one forex trader, any inflation reading ‘higher than consensus should see the market start to price in another rate hike quite aggressively and this should push the Rand stronger to the 55-day moving average level around R10.71’.

The Reserve Bank surprised investors by lifting its key rate last month.

The Rand shed 0.5 per cent against the US Dollar as local trading began.

But with the Pound broadly weakening in response to a surprising decline in the UK consumer price index, the Rand was able to continue trading more strongly against its British counterpart.

Sterling slumped against its peers as UK inflation fell below the Bank of England’s 2 per cent target for the first time in over four years.

Tomorrow’s South African inflation figures will be the main cause of Rand movement, although movement in the GBP/ZAR pairing will also be driven by UK employment data.

Another encouraging result for the British employment sector could help the Pound recover losses.

Later in the week China’s HSBC/Markit services PMI may also impact the commodity-driven Rand.

South African Rand (ZAR) Exchange Rates

[table width=”100%” colwidth=”50|50|50|50|50″ colalign=”left|left|left|left|left”]
Currency, ,Currency,Rate , 
Pound Sterling,,South African Rand,18.0264,
Euro,,South African Rand,14.8929,
US Dollar,,South African Rand,10.8605,
Australian Dollar,,South African Rand,9.7793,
New Zealand Dollar,,South African Rand,9.1006,
Canadian Dollar,,South African Rand,9.8459,
[/table]