Pound to Rand Exchange Rate Forecast - GBP/ZAR Higher Ahead of SA Retail Sales Report

August 10, 2014 - Written by David Woodsmith

STORY LINK Pound to Rand Exchange Rate Forecast - GBP/ZAR Higher Ahead of SA Retail Sales Report

The Pound to Rand exchange rate (GBP/ZAR) suffered losses at the end of last week. Sterling went into decline as uncertainty over Scottish Independence and weaker than forecast trade data caused investors to sell the currency. The GBP/ZAR exchange rate today stands at 17.86339, 0.15 per cent higher on the day (revised 12/08/2014 08:00 GMT)

Members of the UK Parliament warned that Scotland might be left in currency limbo if it votes for independence in September. Uncertainty as to what currency Scotland could use after a positive vote in favour of leaving the UK weighed upon sentiment towards Sterling.

The latest ZAR forex rates are:

- The Rand to Australian Dollar exchange rate is trading down -0.11% at 0.10148 ZAR/AUD.
- The Rand to Euro exchange rate is trading up +0.14% at 0.07041 ZAR/EUR.
- The Rand to Pound Sterling exchange rate is trading down -0.16% at 0.05598 ZAR/GBP.
- The Rand to New Zealand Dollar exchange rate is trading up +0.23% at 0.11154 ZAR/NZD.
- The Rand to Dollar exchange rate is trading up +0.03% at 0.09412 ZAR/USD.

"Arguments based on aspiration rather than reality do little to advance the cause of Scotland and it is clear to our committee that the Scottish Government has failed to make the argument that Scotland would be better off economically as a separate state," said Adrian Bailey, the committee's chair.

Separately, the National Institute for Economic and Social Research warned that Scottish financial institutions could not be sure of access to emergency liquidity if Scotland carried on using Sterling without Britain's agreement.

Also weighing on the UK currency was the release of data earlier in the session, which showed that the UK is continuing to rebalance its economy. According to the Office for National Statistics, the country’s trade deficit widened to £9.4 billion in June, up from the preceding months figure of £9.1 billion.

“Already weak demand in many overseas markets is being hit further by growing uncertainty about the Ukraine crisis, especially in northern Europe, Escalating geopolitical events in Gaza and Iraq add to the sense that global risk aversion is creeping higher, which will inevitably mean slower economic growth,” said Markit’s chief economist Chris Williamson.

Following the data release, the Pound fell broadly against most major peers. As the afternoon progressed investors chose to embark on a bout of profit taking which sent the Pound tumbling against all major currencies.

Earlier in the session, the South African Rand had been under pressure as geopolitical fears weighed upon demand for all riskier and commodity based assets.

The US announced that it has launched airstrikes against militants of the Islamic State in Iraq. According to the Pentagon, US strike aircraft attacked Islamic artillery positions threatening the Kurdish city of Irbil.

As the session progressed, the Rand rallied.

"The Rand weakened earlier today due to geopolitical tension and amid emerging market currency problems. The Turkish Lira came in weaker this morning and the Rand weakened in tandem in a global risk-off trading environment. The Rand is not headline driven and is bouncing around in a range," a local currency trader said.

The Rand’s gains are likely to be relatively short-lived depending on the global situation. An escalation in one of the world’s hot spots is likely to increase demand for safe haven assets at the expense of commodity and emerging market assets.
The next major data released out of South Africa will be Retail Sales data due on Wednesday. On the same day the UK will see the publication of the latest Bank of England inflation data and unemployment reports.

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