Foreign Currency Market Update – GBP / ZAR Update
The Sterling Rand exchange rate clawed its way to 12.3676, its highest level since 26th January, during last week’s session. GBP ZAR had been on the slide from its 21st November high of 13.3578 until the end of last month. This month has seen a minor correction in this major downtrend – however, the slight recovery we have seen since the start of February may now have run out of steam.
There was some downward movement in global commodities prices toward the end of last week, which hit the Rand harder than most of the rest of the sixteen most actively-traded global currencies. Meanwhile, UK data releases continued to provide a gloomy outlook for clients selling the Pound. January’s UK employment figures, released last Wednesday, hinted at a further softening in Britain’s labour market, showing that the number of new claimants last month was more than twice the 3,000 figure which had been expected. Tuesday’s key UK CPI inflation number showed a significant cooling in the rate of British price rises last month, showing that they had dropped to an annualised 3.6% last month versus December’s year-on-year figure of 4.2%. Friday’s UK Retail Sales data for January provided a rare chink of light, showing an expansion of 1.9% in shop sales last month when a slight contraction was anticipated.
*Denotes the importance of the data item *** being the highest level.
** Tuesday morning sees the release of January’s UK Public Sector Borrowing figures – they are expected to show that the British government managed to pay off £6.3bn of its debt last month – a lower number than this could hurt Sterling.
*** Wednesday morning’s release by the Bank of England of the minutes of its February MPC meeting will be closely-monitored by analysts for clues on the future direction of British monetary policy.
*** Friday morning brings the release of the official Q4 GDP figures for the UK economy – a quarterly contraction of 0.2% is expected. Anything worse than this could spark a Sterling sell-off.
Sterling Rand was locked in a pronounced downtrend until the start of February. Last Thursday saw the pair recover to trade to its highest level since the 26th January following strong British Retail Sales numbers and a wobble in share markets due to fears over Iran’s nuclear programme and the lack of positive noises coming out of Greece. However, this week’s session has seen the GBP ZAR exchange rate open up lower than Friday’s market close – a sure technical signal of negativity in a market. With global stock indices making gains during the first session of this week, as institutional investors factor in good news from Greece which is expected within the next twenty four hours, there is the potential for this to be another poor week for the Pound against the Rand. Consecutive closes below 11.8875, which was the 5-month low of February 3rd, would be required to provide confirmation that the downtrend for GBP ZAR has been re-established.
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