GBP EUR Exchange Rate Steady, GBP ZAR Forecast To Continue To Rise

January 31, 2014 - Written by David Woodsmith

STORY LINK GBP EUR Exchange Rate Steady, GBP ZAR Forecast To Continue To Rise

The tone of this morning’s data releases from the eurozone was distinctly negative, but the single currency has so far failed to weaken significantly against the Pound. The Sterling euro exchange rate (GBP/EUR) has held steady throughout the day, weakening only very slightly from its intraday low of 1.2130 to touch 1.2172 earlier on.

The brace of disappointing data releases from mainland Europe was kicked off by December’s German Retail Sales numbers, published first thing this morning. The shop sales figures for last month printed at an annualised -2.4% versus expectations of a showing of 1.9%, providing further evidence that all is far from tickety-boo with the vast Teutonic economy.

Matters got worse for the euro a little later this morning when the latest whole of eurozone Consumer Price Index inflation numbers came in at a below-expectations 0.7%. Analysts had been expecting a showing of 0.9%, so the figure came as a blow to investors holding euro-denominated assts. The inference from the number is that the European Central Bank has the capacity to further cut its key lending rate as the year progresses – an action which it has threatened to carry out since its last cut in November of last year.

Elsewhere, the South African Rand enjoyed some support against Sterling in early trading, sending the GBP ZAR exchange rate down to as low as 18.3340 earlier on. However, the Rand has suffered a sustained bout of selling pressure in the last two hours as market participants continue to factor-in the interest rate hike from the South African Reserve Bank (SARB) earlier this week.

The SARB’s action would ordinarily cause the Rand to improve on the markets, but these are far from ordinary times in South Africa. Instead, investors have taken the move as a sign of panic from the nation’s policymakers and increased fear and panic is the last thing the South African tender needs at this stage.

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