Has Pound Sterling (GBP) Peaked? Gains Forecast For GBP ZAR Exchange Rate

July 15, 2014 - Written by John Cameron

STORY LINK Has Pound Sterling (GBP) Peaked? Gains Forecast For GBP ZAR Exchange Rate

The European Central Bank President Mario Draghi made some interesting comments when he addressed the European Parliament's Committee on Economic and Monetary Affairs in Strasbourg late yesterday.

In a headline-grabbing move, the ECB Chief was forced to rebuff market rumours which suggested that he might be on his way out of the euroland’s central bank. In answer to a question on the subject, Draghi stated emphatically that, ‘I am at the ECB and I'll stay at the ECB, and all the rumours to the contrary, coming from some interested parties perhaps, are unfounded’.

The mere fact that the ECB President was having to issue such a public denial that he is heading towards the exit door could weigh down the single currency in the short to medium term. Mainland Europe’s reserve bank embarked upon a raft of unprecedented policy loosening measures which included the introduction of negative overnight interest rates and €1 trillion worth of targeted Long Term Re-finance Operations just 2 ½ months ago. Any suggestion that the architect of these policies might be on his way out would paint a picture of an organisation in chaos. If market whispers suggesting that Draghi is on his way back to Italy persist, then look for the Pound Sterling euro exchange rate (GBP/EUR) to track Northwards towards its 21-month high of 1.2634 which it touched off on 7th July.

Meanwhile, yesterday’s session saw the Pound lose ground against the euro, sending the GBP EUR exchange rate down into the low 1.2500s. With no UK data of note published on the day, the move appeared to be technical in nature. The early part of this month saw the UK tender surge to its highest level for over five years against a trade-weighted basket of currencies. However, the gains appear to have left Sterling wide open to profit-taking from speculators and last week saw the volume of bullish bets on the Pound from hedge funds decline. Michael Sneyd of BNP Paribas backed-up this theory yesterday, observing that, ‘it’s likely that we are starting to see investors unwinding some of their long positions.’

Elsewhere, the news for the South African Rand (currency:ZAR) continues to deteriorate. Yesterday’s announcement from Japanese car manufacturer Toyota that it would be halting production at its Durban assembly plant from today due to strike action from South African metalworkers which began at the start of this month piled the pressure on the troubled tender. The development helped propel the Sterling Rand exchange rate (GBP/ZAR) up to as high as 18.4000 during early trading yesterday. The pair peeled back throughout the day, but many analysts forecast further gains for the pair throughout the week if striking workers from National Union of Metalworkers of South Africa (NUMSA) fail to reach a workable accord with their bosses.

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TAGS: Daily Currency Updates Euro Forecasts Euro Pound Forecasts Pound Eu Forecasts